{"id":63198,"date":"2002-03-13T00:00:00","date_gmt":"2002-03-12T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/bhatia-international-vs-bulk-trading-s-a-anr-on-13-march-2002"},"modified":"2017-09-25T17:08:06","modified_gmt":"2017-09-25T11:38:06","slug":"bhatia-international-vs-bulk-trading-s-a-anr-on-13-march-2002","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/bhatia-international-vs-bulk-trading-s-a-anr-on-13-march-2002","title":{"rendered":"Bhatia International vs Bulk Trading S. A. & Anr on 13 March, 2002"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Bhatia International vs Bulk Trading S. A. & Anr on 13 March, 2002<\/div>\n
Author: S N Variava<\/div>\n
Bench: G.B. Pattanaik, S.N. Phukan, S.N. Variava<\/div>\n
           CASE NO.:\nAppeal (civil) 6527  of  2001\n\n\n\nPETITIONER:\nBHATIA INTERNATIONAL\n\n\tVs.\n\nRESPONDENT:\nBULK TRADING S. A. & ANR.\n\nDATE OF JUDGMENT:\t13\/03\/2002\n\nBENCH:\nG.B. Pattanaik, S.N. Phukan & S.N. Variava\n\n\n\n\nJUDGMENT:\n<\/pre>\n
S. N. VARIAVA, J.\n<\/p>\n
1.\tThis Appeal is against a Judgment dated 10th October, 2000
\npassed by the Madhya Pradesh High Court.\n<\/p>\n
2.\tBriefly stated the facts are as follows:\n<\/p>\n
The Appellant entered into a contract with the 1st Respondent on 9th
\nMay, 1997.  This contract contained an arbitration clause which
\nprovided that arbitration was to be as per the rules of the International
\nChamber of Commerce (for short ICC). On 23rd October, 1997 the 1st
\nRespondent filed a request for arbitration with ICC. Parties agreed that
\nthe arbitration be held in Paris, France.  ICC has appointed a sole
\narbitrator<\/p>\n
3.\t1st Respondent filed an application under Section 9 of the
\nArbitration and Conciliation Act, 1996 (hereinafter called the said Act)
\nbefore the IIIrd Additional District Judge, Indore, M.P. against the
\nAppellant and the 2nd Respondent.  One of the interim reliefs sought
\nwas an order of injunction restraining these parties from alienating,
\ntransferring and\/or creating third party right, disposing of, dealing with
\nand\/or selling their business assets and properties.   The Appellant
\nraised the plea of maintainability of such an application.   The
\nAppellant contended that Part I of the said Act would not apply to
\narbitrations where the place of arbitration is not in India.   This
\napplication was dismissed by the IIIrd Additional District Judge on 1st
\nFebruary, 2000.\t It was held that the Court at Indore had jurisdiction
\nand the application was maintainable.  The Appellant filed a Writ
\nPetition before the High Court of Madhya Pradesh, Indore Bench. The
\nsaid Writ Petition has\tbeen dismissed by the impugned Judgment
\ndated 10th October, 2000.\n<\/p>\n
4.\tOn behalf of the Appellants, Mr. Sen submits that Part I of the
\nsaid Act only applies to arbitrations where the place of arbitration is in
\nIndia.\tHe submits that if the place of arbitration is not in India then
\nPart II of the said Act would apply.   He relies on sub-section (2)
\nSection 2 of the said Act which\t provides that Part I shall apply where
\nthe place of arbitration is in India.\tHe submits that sub-section (2) of
\nSection 2 makes it clear that the provisions of Part I do not apply
\nwhere the place of arbitration is not in India.\t Mr. Sen points out that
\nthe said Act is based on UNCITRAL Model Law on International
\nCommercial Arbitration. He points out that Article 1(2) of UNCITRAL
\nModel Law provides that\t the law, except Articles 8, 9, 35 and 36 of
\nthe Model Law, would apply only if the Arbitration takes place in the
\nterritory of the State. Mr. Sen submits that Article 9 of the UNCITRAL
\nModel Law permits a party to request a Court for interim measure
\neven if the arbitration is not in the territory of the State. He submits
\nthat whilst framing the said Act the Legislature has purposely not
\nadopted Article 1(2) of the UNCITRAL Model Law. He submits that this
\nclearly shows the intention of the Legislature that they did not want
\nPart I to apply to arbitrations which take place outside India.\n<\/p>\n
5.\tMr. Sen points out that Section 2(f) of the said Act defines an
\n“international commercial arbitration”. Mr. Sen submits that an
\ninternational commercial arbitration could take place either in India or
\noutside India.\tHe submits that if the international commercial
\narbitration takes place out of India then Part I of the said Act would
\nnot apply.  He submits that Part II of the said Act applies to foreign
\nawards.\n<\/p>\n
6.\tMr. Sen fairly draws the attention of this Court to sub-sections
\n(3), (4) and (5) of Section 2, which read as follows:
\n“2(3) This Part shall not affect any other law for the time
\nbeing in force by virtue of which certain disputes may not
\nbe submitted to arbitration.\n<\/p>\n
(4) This Part except sub-section (1) of section 40, sections
\n41 and 43 shall apply to every arbitration under any other
\nenactment for the time being in force, as if the arbitration
\nwere pursuant to an arbitration agreement and as if that
\nother enactment were an arbitration agreement except in
\nso far as the provisions of this Part are inconsistent with
\nthat other enactment or with any rules made thereunder.\n<\/p>\n
(5) Subject to the provisions of sub-section (4), and save
\nin so far as is otherwise provided by any law for the time
\nbeing in force or in any agreement in force between India
\nand any other country or countries, this Part shall apply to
\nall arbitrations and to all proceedings relating thereto.”\n<\/p>\n
Mr. Sen submits that sub-sections (3), (4) and (5) of Section 2 would
\nnecessarily only apply to arbitration which take place in India.  He
\nsubmits that, therefore, even though the sub-section (4) of Section 2
\nuses the words “every arbitration” and sub-section (5) of Section 2
\nuses the words “all arbitrations and to all proceedings relating
\nthereto”, they must  necessarily refer only to arbitrations which take
\nplace in India. He submits that otherwise there would be a conflict
\nbetween sub section (2) on one hand and sub sections (4) and\/or (5)
\non the other. Mr. Sen submits that if it is held that Part I applies to all
\narbitrations i.e. even to arbitrations whose place of arbitration is not in
\nIndia, then Sub section (2) of Section 2 would become redundant
\nand\/or otiose.\n<\/p>\n
7.\tMr. Sen\t submits that in this matter arbitration is being held in
\nParis i.e. out of India. He submits that to such arbitrations Part I does
\nnot apply. He submits that  Sections 9 and 17 fall in Part I. He submits
\nthat Sections 9 and 17\twould not apply and cannot be used in cases
\nwhere the place of arbitration is not in India.\n<\/p>\n
8.\tMr. Sen submits out that Part II deals with enforcement of
\nforeign awards and makes elaborate provisions in respect thereof. He
\npoints out that in Part II there is no provision similar to Sections 9 and\n<\/p>\n
17.   He submits that the Legislature, whilst providing for foreign
\nawards, has purposely omitted to make any provision for interim
\nmeasures either by the Court or by arbitral tribunal.  He submits that
\nthe reason for this is obvious. He submits that in cases, where
\narbitrations take place outside India they  would be governed by the
\nrules of the country or the body under whose jurisdiction they are
\nbeing conducted.  He submits that under the ICC Rules of Arbitration
\nArticle 23 provides for interim measures.  Mr. Sen submits that the
\nremedy, if any, is to apply for interim relief under Article 23.\n<\/p>\n
9.\tMr. Sen submits that a plain reading of Section 9 also makes it
\nclear that it would not apply to arbitrations which take place outside
\nIndia. He submits that Section 9 provides that an application for
\ninterim measure must be made before the award is enforced in
\naccordance with Section 36.  Mr. Sen submits that Section 36 deals
\nwith enforcement of domestic awards only.   Mr. Sen submits that
\nprovisions for enforcement of foreign awards are contained in Sections
\n48, 49, 57 and 58.    He submits that it is very significant that Section
\n9 does not talk of enforcement of the award in accordance with
\nSections 48, 49, 57 and 58.    Mr. Sen submits that this also makes it
\nclear that the provisions of Part I of the said Act do not apply to
\narbitrations which do not take place in India.\n<\/p>\n
10.\tMr. Sen also relies on Section 5 of the said Act and submits that
\nthe underlying principle is that a judicial authority should not interfere
\nexcept as provided in  said act.  He submits that the rational behind
\nthis is that there should be minimum interference by Courts.\n<\/p>\n
11.\tMr. Sen submits that the Court in Indore could not have
\nentertained the application under Section 9 as Part I did not apply to
\narbitrations which take place outside India.  He submits that the Court
\nin Indore and the High Court were wrong in rejecting the application of
\nthe Appellant and in holding that the Court had jurisdiction.\n<\/p>\n
12.\tMr. Sen states that on this aspect there is no authority of this
\nCourt.\tHe points out that a number of High Courts including the High
\nCourts at Orissa, Bombay, Madras, Delhi and Calcutta have held that
\nPart I of the said Act would not apply to arbitrations which take place
\noutside India.\tHe points out that earlier, two single Judges of the
\nDelhi High Court had held that Part I applies to arbitrations which take
\nplace outside India. He points out that now a Division Bench of the
\nDelhi High Court has held that Part I does not apply to arbitrations
\nwhich take place outside India.\t He submits that therefore now the
\nonly High Court which has held, that Part I applies to arbitrations
\nwhich take place outside India, is the Madhya Pradesh High Court,
\nwhich has so held by the impugned Judgment.  Mr. Sen took us
\nthrough the authority of the Division Bench of the Delhi High Court in
\nthe case of Marriott International Inc. v. Ansal Hotels Ltd. reported in
\nAIR (2000) Delhi 377.\tHe also took us through an unreported
\nJudgment of a Division Bench of the Calcutta High Court dated 27th
\nJanuary, 1998 in the case of Keventea Agro Ltd. v. Agram Company
\nLtd..\tThese authorities adopt, more or less, the same reasoning as
\nhas been canvassed by Mr. Sen.\tThe Delhi High Court further notices
\nthat this reasoning may lead to a situation where a party may be left
\nremedy-less and, therefore, would work hardship on a party.  The
\nDelhi High Court however observed as follows :\n<\/p>\n
” We may agree with the learned counsel for the appellant
\nthat it may, in some cases, lead to hardship to a party,
\nhowever, when the language of the statute is plain and
\nunambiguous and admits of only one meaning.   The
\nquestion of construction of statute arises, for the Act
\nspeaks for itself even if the result is strange or surprising,
\nunreasonable or unjust or oppression as it is not for the
\nCourts to extend the scope of the statute beyond the
\ncontemplation of the legislature.   It is entirely for the
\nlegislature to look into this question.”\n<\/p>\n
13.\tOn the other hand Mr. Sundaram for the Respondents has taken
\nus through the various provisions of the said Act.  He has ably
\nsubmitted that a conjoint reading of the provisions shows that Part I is
\nto apply to all arbitrations.  He submits that unless the parties by their
\nagreement excludes its provisions Part I would also apply to all
\ninternational commercial arbitrations including those that take place
\nout of India.\n<\/p>\n
14.\tAt first blush the arguments of Mr. Sen appear very attractive.
\nUndoubtedly sub-section (2) of Section 2 states that Part I is to apply
\nwhere the place of arbitration is in India.  Undoubtedly, Part II applies
\nto foreign awards. Whilst the submissions of Mr. Sen are attractive one
\nhas to keep in mind the consequence which would follow if they are
\naccepted.  The result would :-\n<\/p>\n
a) amount to holding that the Legislature has left a lacunae in the said
\nAct.  There would be a lacunae as neither Part I or II would apply to
\narbitrations held in a country which is not a signatory to the New York
\nConvention or the Geneva Convention (hereinafter called a non-
\nconvention country).  It would mean that there is no law, in India,
\ngoverning such arbitrations.\n<\/p>\n
b) lead to an anomalous situation, inasmuch Part I would apply to
\nJammu and Kashmir in all international commercial arbitrations but
\nPart I would not apply to the rest of India if the arbitration takes place
\nout of India.\n<\/p>\n
c) lead to a conflict between sub-section (2) of Section 2 on one hand
\nand sub-sections (4) and (5) of Section 2 on the other.\t Further sub-
\nsection (2) of Section 2 would also be in conflict with Section 1 which
\nprovides that the Act extends to the whole of India.\n<\/p>\n
d) leave a party remediless inasmuch as in international commercial
\narbitrations which take place out of India the party would not be able
\nto apply for interim relief in India even though the properties and
\nassets are in India.  Thus a party may not be able to get any interim
\nrelief at all.\n<\/p>\n
15.\tIt is thus necessary to see whether the language of the said Act
\nis so plain and unambiguous as to admit of only the interpretation
\nsuggested by Mr. Sen.  It must be borne in mind that the very object
\nof the Arbitration and Conciliation Act of 1996, was to establish a
\nuniform legal framework for the fair and efficient settlement of
\ndisputes arising in international commercial arbitration.  The
\nconventional way of interpreting a statute is to seek the intention of its
\nmakers.\t If a statutory provision is open to more than one
\ninterpretation then the Court has to choose that interpretation which
\nrepresents the true intention of the legislature.  This task often is not
\nan easy one and several difficulties arise on account of variety of
\nreasons, but at the same, it must be borne in mind that it is impossible
\neven for the most imaginative legislature to forestall exhaustively
\nsituations and circumstances that may emerge after enacting a statute
\nwhere its application may be called for.  It is in such a situation the
\nCourts’ duty to expound arises with a caution that the Court should not
\ntry to legislate.  While examining a particular provision of a statute to
\nfind out whether the jurisdiction of a Court is ousted or not, the
\nprinciple of universal application is that ordinarily the jurisdiction may
\nnot be ousted unless the very statutory provision explicitly indicates or
\neven by inferential conclusion the Court arrives at the same when such
\na conclusion is the only conclusion.  Notwithstanding the conventional
\nprinciple that the duty of judges is to expound and not to legislate.
\nThe Courts have taken the view that the judicial art of interpretation
\nand appraisal is imbued with creativity and realism and since
\ninterpretation always implied a degree of discretion and choice, the
\nCourt would adopt particularly in areas such as, constitutional
\nadjudication dealing with social and defuse rights.  Courts are
\ntherefore, held as “finishers, refiners, and polishers of legislatures
\nwhich gives them in a state requiring varying degrees of further
\nprocessing”.  (see Corrocraft Ltd. vs. Pan American Airways (1968) 3
\nWLR 714 at page 732, AIR 1975 SC 1951 at page 1957.  If a language
\nused is capable of bearing more than one construction, in selecting the
\ntrue meaning, regard must be had to the consequences, resulting from
\nadopting the alternative constructions.\t A construction that results in
\nhardship, serious inconvenience, injustice, absurdity or anomaly or
\nwhich leads to inconsistency or uncertainty and friction in the system
\nwhich the statute purports to regulate has to be rejected and
\npreference should be given to that construction which avoids such
\nresults. (see Johnson vs. Moreton (1978) 3 All. ER 37 and Stock vs.
\nFrank Jones (Tipton) Ltd. (1978) 1 All. ER 948).  In selecting out of
\ndifferent interpretations the Court will adopt that which is just
\nreasonable and sensible rather than that which is none of those things,
\nas it may be presumed that the legislature should have used the word
\nin that interpretation which least offends our sense of justice.  In
\nShanon Realites Ltd.  vs. Sant Michael (924) A.C. page 185 at page
\n192-193 Lord Shaw stated, “where words of a statute are clear, they
\nmust, of course, be followed, but in their Lordships opinion where
\nalternative constructions are equally open that alternative is to be
\nchosen which will be consistent with the smooth working of the system
\nwhich the statute purports to be regulating and that alternative is to
\nbe rejected which will introduce uncertainty, friction or confusion into
\nthe working of the system.”  This principle was accepted by Subba
\nRao, J. while construing Section 193 of the Sea Customs Act and in
\ncoming to the conclusion that the Chief of Customs Authority was not
\nan officer of custom. (AIR 1961 SC 1549).\n<\/p>\n
16.\tA reading of the provisions shows that the said Act applies to
\narbitrations which are held in India between Indian nationals and to
\ninternational commercial arbitrations whether held in India or out of
\nIndia.\tSection 2(f) defines an international commercial arbitration.
\nThe definition makes no distinction between international commercial
\narbitrations held in India or outside India. An international commercial
\narbitration may be held in a country which is a signatory to either the
\nNew York Convention or the Geneva Convention (hereinafter called the
\nconvention country).  An international commercial arbitration may be
\nheld in a non-convention country.  The said Act nowhere provides that
\nits provisions are not to apply to international commercial arbitrations
\nwhich take place in a non-convention country.\tAdmittedly Part II only
\napplies to arbitrations which take place in a convention country.  Mr.
\nSen fairly admitted that Part II would not apply to an international
\ncommercial arbitration which takes place in a non-convention country.
\nHe also fairly admitted that there would be countries which are not
\nsignatories either to the New York Convention or to the Geneva
\nConvention.  It is not possible to accept submission that the said Act
\nmakes no provision for international commercial arbitrations which
\ntake place in a non-convention country.\n<\/p>\n
17.\tSection 1 of the said Act reads as follows:\n<\/p>\n
“1. Short title, extent and commencement.- (1) This
\nAct may be called the Arbitration and Conciliation Act,
\n1996.\n<\/p>\n
\t(2) It extends to the whole of India:\n<\/p>\n
\tProvided that Parts I, III and IV shall extend to the
\nState of Jammu and Kashmir only in so far as they relate
\nto international commercial arbitration or, as the case may
\nbe, international commercial conciliation.”\n<\/p>\n
The words “this Act” means the entire Act.  This shows that the entire
\nAct, including Part I, applies to the whole of India. The fact that all
\nParts apply to whole of India is clear from the proviso which provides
\nthat Parts I, III and IV will apply to the State of Jammu and Kashmir
\nonly so far as international commercial arbitrations\/conciliations are
\nconcerned. Significantly the proviso does not state that Part I would
\napply to Jammu and Kashmir only if the place of the international
\ncommercial arbitration is in Jammu and Kashmir. Thus if sub-section
\n(2) of Section 2 is read in the manner suggested by Mr. Sen there
\nwould be a conflict between Section 1 and Section 2(2).\t There would
\nalso be an anomaly inasmuch as even if an international commercial
\narbitration takes place outside India, Part I would continue to apply in
\nJammu and Kashmir, but it would not apply to the rest of India.\t  The
\nLegislature could not have so intended.\n<\/p>\n
18.\tSection 2(a) defines “arbitration” as meaning any arbitration
\nwhether or not administered by a permanent arbitral institution. Thus,
\nthis definition recognises that the arbitration could be under a body
\nlike the Indian Chambers of Commerce or the International Chamber
\nof Commerce. Arbitrations under International Chamber of Commercie
\nwould be held, in most cases, out of India.   Section 2 (c) provides
\nthat the term “arbitral award” would include an interim award.\n<\/p>\n
19.\tSection 2(f) of the said Act defines an international commercial
\narbitration.  It reads as follows:\n<\/p>\n
“2(f) “international commercial arbitration” means an
\narbitration relating to disputes arising out of legal
\nrelationships, whether contractual or not, considered as
\ncommercial under the law in force in India and where at
\nleast one of the parties is –\n<\/p>\n
(i)\tan individual who is a national of, or habitually
\nresident in, any country other than India; or<\/p>\n
(ii)\ta body corporate which is incorporated in any
\ncountry other than India; or<\/p>\n
(iii)\ta company or an association or a body of
\nindividuals whose central management and
\ncontrol is exercised in any country other than
\nIndia; or<\/p>\n
(iv)\tthe Government of a foreign country.”\n<\/p>\n
As stated above the definition of “international commercial arbitration”
\nmakes no distinction between international commercial arbitrations
\nwhich take place in India or internal commercial arbitrations which
\ntake place outside India.\n<\/p>\n
20.\tSection 2(e) defines “Court” as follows:\n<\/p>\n
2(e) “Court” means the principle Civil Court of original
\njurisdiction in a district, and includes the High Court in
\nexercise of its ordinary original civil jurisdiction, having
\njurisdiction to decide the questions forming the subject-
\nmatter of the arbitration if the same had been the subject-
\nmatter of a suit, but does not include any civil court of a
\ngrade inferior to such principal Civil Court, or any Court of
\nSmall Causes.”\n<\/p>\n
A Court is one which would otherwise have jurisdiction in respect of
\nthe subject matter. The definition does not provide that the Courts in
\nIndia, will not have jurisdiction if an international commercial
\narbitration takes place outside India. Courts in India would have
\njurisdiction even in respect of an international commercial arbitration.
\nAs stated above an ouster of jurisdiction cannot be implied.   An ouster
\nof jurisdiction has to be express.\n<\/p>\n
21.\tNow let us look at sub-sections (2), (3), (4) and (5) of Section 2.
\nSub-section (2) of Section (2) provides that Part I would apply where
\nthe place of arbitration is in India.  To be immediately noted that it is
\nnot providing that Part I shall not apply where the place of arbitration
\nis not in India.  It is also not providing that Part I will “only” apply
\nwhere the place of arbitration is in India (emphasis supplied). Thus the
\nLegislature has not provided that Part I is not to apply to arbitrations
\nwhich take place outside India.\t  The use of the language is significant
\nand important.\tThe Legislature is emphasising that the provisions of
\nPart I\twould\tapply  to  arbitrations which take place in India, but not
\nproviding that the provisions of Part I will not apply to arbitrations
\nwhich take place out of India.\tThe wording of sub-section (2) of
\nSection 2 suggests that the intention of the Legislature was to make
\nprovisions of Part I compulsorily applicable to an arbitration, including
\nan international commercial arbitration, which takes place in India.
\nParties cannot, by agreement, override or exclude the non-derogable
\nprovisions of Part I in such arbitrations.  By omitting to provide that
\nPart I will not apply to international commercial arbitrations which take
\nplace outside India the affect would be that Part I would also apply to
\ninternational commercial arbitrations held out of India.  But by not
\nspecifically providing that the provisions of Part I apply to international
\ncommercial arbitrations held out of India, the intention of the
\nLegislature appears to be to ally parties to provide by agreement that
\nPart I or any provision therein will not apply.\t Thus in respect of
\narbitrations which take place outside India even the non-derogable
\nprovisions of Part I can be excluded. Such an agreement may be
\nexpress or implied.\n<\/p>\n
22.\tIf read in this manner there would be no conflict between
\nSection 1 and Section 2(2).  The words “every arbitration” in sub-
\nsection (4) of Section 2 and the words “all arbitrations and all
\nproceedings relating thereto” in sub-section (5) of Section 2 are wide.
\nSub-sections (4) and (5) of Section 2 are not made subject to sub-
\nsection (2) of Section 2.   It is significant that sub-section (5) is made
\nsubject to sub-section (4) but not to sub-section (2).\tTo accept Mr.
\nSen’s submission would necessitate adding words in sub-sections (4)
\nand (5) of Section 2, which the Legislature has purposely omitted to
\nadd viz. “Subject to provision of sub-section (2)”. However read in the
\nmanner set out hereinabove there would also be no conflict between
\nsub-section (2) of  Section 2 and sub-sections (4) and\/or (5) of
\nSection 2.\n<\/p>\n
23.\tThat the Legislature did not intend to exclude the applicability of
\nPart I to arbitrations, which take place outside India, is further clear
\nfrom certain other provisions of the said Act.\tSub-section (7) of
\nSection 2 reads as follows:\n<\/p>\n
“(7) An arbitral award made under this Part shall be
\nconsidered as a domestic award.”\n<\/p>\n
As is set out hereinabove the said Act applies to (a) arbitrations held in
\nIndia between Indians (b) international commercial arbitrations.  As
\nset out hereinabove international commercial arbitrations may take
\nplace in India or outside India.  Outside India an international
\ncommercial arbitration may be held in a convention country or in a
\nnon-convention country.\t The said Act however only classifies awards
\nas “domestic awards” or “foreign awards”.  Mr. Sen admits that
\nprovisions of Part II makes it clear that “foreign awards” are only
\nthose where the arbitration takes place in a convention country.
\nAwards in arbitration proceedings which take place in a non-
\nconvention country are not considered to be “foreign awards” under
\nthe said Act. They would thus not be covered by Part II.  An award
\npassed in an arbitration which takes place in India would be a
\n“domestic award”.  There would thus be no need to define an award as
\na “domestic award” unless the intention was to cover awards which
\nwould otherwise not be covered by this definition.  Strictly speaking an
\naward passed in an arbitration which takes place in a non-convention
\ncountry would not be a “domestic awards”.  Thus the necessity is to
\ndefine a “domestic award” as including all awards made under Part I.
\nThe definition indicates that an award made in an international
\ncommercial arbitration held in a non-convention country is also
\nconsidered to be a “domestic award”.\n<\/p>\n
24.\tSection 5 provides that a judicial authority shall not intervene
\nexcept where so provided in Part I.  Section 8 of the said Act permits a
\njudicial authority before whom an action is brought in a matter to refer
\nparties to arbitration.\t If the matters were to be taken before a judicial
\nauthority in India it would be a Court as defined in Section 2(e).  Thus
\nif Part I was to only apply to arbitrations which take place in India the
\nterm “Court” would have been used in Sections 5 and 8 of the said
\nAct.  The Legislature was aware that, in international commercial
\narbitrations, a matter may be taken before a judicial authority outside
\nIndia.\tAs Part I was also to apply to international commercial
\narbitrations held outside India the term “judicial authority” has been
\nused in Sections 5 and 8.\n<\/p>\n
25.\tThe beginning part of Section 28 reads as follows:\n<\/p>\n
“28. Rules applicable to substance of dispute.- (1)
\nwhere the place of arbitration is situate in India,-\n<\/p>\n
\txxx\t\t\txxx\t\t\txxx
\n\txxx\t\t\txxx\t\t\txxx”\n<\/p>\n
Section 28 is in Part I.  If Part I was not to apply to an arbitration
\nwhich takes place outside India there would be no necessity to specify
\nthat the rules are to apply “where the place of arbitration is situate in
\nIndia”.\t It has been held in the case of National Thermal Power
\nCorporation vs.\t Singer Company and others<\/a> reported in (1992) 3 SCC
\n551 that  in international commercial arbitrations parties are at liberty
\nto choose, expressly or by necessary implication, the law and the
\nprocedure to be made applicable.   The procedure or the rules
\ngoverning such arbitration may be of the country where the arbitration
\nis being held or the body under whose aegis the arbitration is being
\nheld.\tAll bodies which conduct arbitrations and all countries have
\nrules and laws governing arbitrations. Thus Section 28 does not
\nprovide for rules where the place of arbitration is out of India.\n<\/p>\n
26.\tMr. Sen had also submitted that Part II, which deals with
\nenforcement of foreign awards does not contain any provision similar
\nto Section 9 or Section 17.   As indicated earlier Mr. Sen had
\nsubmitted that this indicated the intention of Legislature not to apply
\nSections 9 and 17 to arbitrations, like the present, which are taking
\nplace in a foreign country.  The said Act is one consolidated and
\nintegrated Act.\t General provisions applicable to all arbitrations will not
\nbe repeated in all chapters or parts. The general provisions will apply
\nto all chapters or parts unless the statute expressly states that they
\nare not to apply or where, in respect of a matter, there is a separate
\nprovision in a separate Chapter or Part. Part II deals with enforcement
\nof foreign awards.  Thus Sections 44 in (Chapter I) and Section 53 (in
\nChapter II) define foreign awards, as being awards covered by
\narbitrations under the New York Convention and the Geneva
\nConvention respectively.   Part II then contains provisions for
\nenforcement of “foreign awards” which necessarily would be different.
\nFor that reason special provisions for enforcement of foreign awards
\nare made in Part II.  To the extent that Part II provides a separate
\ndefinition of an arbitral award and separate provisions for enforcement
\nof foreign awards, the provisions in Part I dealing with these aspects
\nwill not apply to such foreign awards.\tIt must immediately be clarified
\nthat the arbitration not having taken place in India, all or some of the
\nprovisions of Part I may also get excluded by an express or implied
\nagreement of parties.  But if not so excluded the provisions of Part I
\nwill also apply to “foreign awards”.  The opening words of Sections 45
\nand 54, which are in Part II, read “notwithstanding anything contained
\nin Part I”.  Such a non-obstante clause had to be put in because the
\nprovisions of Part I apply to Part II..\n<\/p>\n
27.\tMr. Sen had also relied upon Article 1(2) of the UNCITRAL Model
\nLaw and had submitted that India has purposely not adopted this
\nArticle.  He had submitted that the fact that India had not provided
\n(like in the UNCITRAL Model Law) that Section 9 would apply to
\narbitral proceedings which take place out of India indicated the
\nintention of the Legislature not to apply Section 9 to such arbitrations.
\nWe are unable to accept this submission.  Article 1(2) of UNCITRAL
\nModel Law reads as follows :\n<\/p>\n
(2) The provisions of this Law, except articles 8, 9,
\n35 and 36, apply only if the place of arbitration is in the
\nterritory of this State.” (emphasis supplied)<\/p>\n
Thus Article 1(2) of UNCITRAL Model Laws uses the word “only” to
\nemphasize that the provisions of that Law are to apply if the place of
\narbitration is in the territory of that State.\tSignificantly in Section 2(2)
\nthe word “only” has been omitted.  The omission of this word changes
\nthe whole complexion of the sentence.  The omission of the word
\n“only” in Section 2(2) indicates that this sub-section is only an
\ninclusive and clarificatory provision.\tAs stated above it is not providing
\nthat provisions of Part I do not apply to arbitration which take place
\noutside India.\tThus there was no necessity of seperately providing
\nthat Section 9 would apply.\n<\/p>\n
28.\tNow let us consider Section 9.\tIt reads as follows:
\n“9. Interim measures, etc. by court.- A party may,
\nbefore or during arbitral proceedings or at any time after
\nthe making of the arbitral award but before it is enforced
\nin accordance with section 36, apply to a court:-\n<\/p>\n
(i)\t    for the appointment of a guardian for a minor or a
\nperson of unsound mind for the purposes of
\narbitral proceedings; or<\/p>\n
(ii)\tfor an interim measure of protection in respect of
\nany of the following matters, namely:-\n<\/p>\n
(a)\tthe preservation, interim custody or sale of any
\ngoods which are the subject-matter of the arbitration
\nagreement;\n<\/p>\n
(b)\tsecuring the amount in dispute in the arbitration;\n<\/p>\n
(c)\tthe detention, preservation or inspection of any
\nproperty or thing which is the subject-matter of the
\ndispute in arbitration, or as to which any question
\nmay arise therein and authorising for any of the
\naforesaid purposes any person to enter upon any
\nland or building in the possession of any party, or
\nauthorising any samples to be taken or any
\nobservation to be made, or experiment to be tried,
\nwhich may be necessary or expedient for the
\npurpose of obtaining full information or evidence;\n<\/p>\n
(d)\tinterim injunction or the appointment of a receiver;\n<\/p>\n
(e)\tsuch other interim measure of protection as may
\nappear to the court to be just and convenient,
\nand the Court shall have the same power for making orders as it
\nhas for the purpose of, and in relation to, any proceedings before
\nit.”\n<\/p>\n
Thus under Section 9 a party could apply to the court (a) before, (b)
\nduring arbitral proceedings or (c) after the making of the arbitral
\naward but before it is enforced in accordance with Section 36.\tThe
\nwords “in accordance with Section 36” can only go with the words
\n“after the making of the arbitral award”.  It is clear that the words “in
\naccordance with Section 36” can have no reference to an application
\nmade “before” or “during the arbitral proceedings”.  Thus it is clear
\nthat an application for interim measure can be made to Courts in
\nIndia, whether or not the arbitration takes place in India, before or
\nduring arbitral proceedings.  Once an Award is passed, then that
\naward itself can be executed.\tSections 49 and 58 provide that awards
\ncovered by Part II are deemed to be a decree of the Court.  Thus
\n“foreign awards” which are enforceable in India are deemed to be
\ndecrees.  A domestic award has to be enforced under the provisions of
\nCivil Procedure Code.  All that Section 36 provides is that an
\nenforcement of a domestic award is to take place after the time to
\nmake an application to set aside the award has expired or such an
\napplication has been refused.  Section 9 does suggest that once an
\naward is made an application for interim measure can only be made if
\nthe award is a “domestic award” as defined in Section 2(7) of the said
\nAct.  Thus where the Legislature wanted to restrict the applicability of
\nSection 9 it has done so specifically.\n<\/p>\n
29.\t We see no substance in the submission that there would be
\nunnecessary interference by courts in arbitral proceedings.  Section 5
\nprovides that no judicial authority shall intervene except where so
\nprovided. Section 9 does not permit any or all applications.  It only
\npermits applications for interim measures mentioned in clauses (i) and\n<\/p>\n
(ii) thereof.  Thus there cannot be applications under Section 9 for stay
\nof arbitral proceedings or to challenge the existence or validity of
\narbitration agreements or the jurisdiction of the arbitral tribunal.  All
\nsuch challenges would have to be made before the arbitral tribunal
\nunder the said Act.\n<\/p>\n
30.\tMr. Sen had also submitted that the term “arbitral award”
\nincludes an interim award.  He had submitted that it would be open for
\nthe arbitral tribunal to pass interim awards and those interim awards
\ncould be enforced in India under Part II.  However, there is a
\ndifference between an “interim award” and an “interim order”.
\nUndoubtedly, the arbitral tribunal could pass an interim award.\t But an
\ninterim order or directions passed by the arbitral tribunal would not be
\nenforceable in India.  Thus even in respect of arbitrations covered by
\nPart II a party would be precluded from getting any interim relief.   In
\nany event, on Mr. Sen’s interpretation, an award passed in arbitral
\nproceedings held in a non-convention country could not be enforced.
\nThus such a party would be left completely remediless.\n<\/p>\n
31.\tIf a party cannot secure, before or during the pendency of the
\narbitral proceedings, an interim order in respects of items provided in
\nSection 9(i) & (ii) the result may be that the arbitration proceedings
\nmay themselves get frustrated e.g. by non appointment of a guardian
\nfor a minor or person of unsound mind or the subject matter of the
\narbitration agreement not being preserved. This could never have
\nbeen the intention of the Legislature.\n<\/p>\n
32.\tTo conclude we hold that the provisions of Part I would apply to
\nall arbitrations and to all proceedings relating thereto.  Where such
\narbitration is held in India the provisions of Part I would compulsory
\napply and parties are free to deviate only to the extent permitted by
\nthe derogable provisions of Part I. In cases of international commercial
\narbitrations held out of India provisions of Part I would apply unless
\nthe  parties by agreement, express or implied, exclude all or any of its
\nprovisions. In that case the laws or rules chosen by the parties would
\nprevail.  Any provision, in Part I, which is contrary to or excluded by
\nthat law or rules will not apply.\n<\/p>\n
33.\tFaced with this situation Mr. Sen submits that, in this case the
\nparties had agreed that the arbitration be as per the rules of ICC.  He
\nsubmits that thus by necessary implication Section 9 would not apply.
\nIn our view in such cases the question would be whether Section 9
\ngets excluded by the ICC Rules of Arbitration. Article 23 of ICC Rules
\nreads as follows:\n<\/p>\n
“Conservatory and Interim Measures<\/p>\n
\t1. Unless the parties have otherwise agreed, as soon
\nas the file has been transmitted to it, the Arbitral Tribunal
\nmay, at the request of a party, order any interim or
\nconservatory measure it deems appropriate.   The Arbitral
\nTribunal may make the granting of any such measure
\nsubject to appropriate security being furnished by the
\nrequesting party.   Any such measure shall take the form
\nof an order, giving reasons, or of an Award, as the Arbitral
\nTribunal considers appropriate.\n<\/p>\n
\t2. Before the file is transmitted to the Arbitral
\nTribunal, and in appropriate circumstances even
\nthereafter, the parties may apply to any competent judicial
\nauthority for interim or conservatory measures.\t  The
\napplication of a party to a judicial authority for such
\nmeasures or for the implementation of any such measures
\nordered by an Arbitral Tribunal shall not be deemed to be
\nan infringement or a waiver of the arbitration agreement
\nand shall not affect the relevant powers reserved to the
\nArbitral Tribunal.  Any such application and any measures
\ntaken by the judicial authority must be notified without
\ndelay to the Secretariat.   The Secretariat shall inform the
\nArbitral Tribunal thereof.”\n<\/p>\n
34.\tThus Article 23 of the ICC rules permits parties to apply to a
\ncompetent judicial authority for interim and conservatory measures.
\nTherefore, in  such cases an application can be made under Section 9
\nof the said Act.\n<\/p>\n
35.\tLastly it must be stated that the said Act does not appear to be a
\nwell drafted legislation.  Therefore the High Courts of Orissa, Bombay,
\nMadras, Delhi and Calcutta cannot be faulted for interpreting it in the
\nmanner indicated above. However, in our view a proper and conjoint
\nreading of all the provisions indicates that Part I is to apply also to
\ninternational commercial arbitrations which take place out of India,
\nunless the parties by agreement, express or  implied exclude it or any
\nof its provisions. Such an interpretation does not lead to any conflict
\nbetween any of the provisions of the said Act.\tOn this interpretation
\nthere is no lacunae in the said Act.  This interpretation also does not
\nleave a party remedyless.  Thus such an interpretation has to be
\npreferred to the one adopted by the High Courts of Orissa, Bombay,
\nMadras, Delhi and Calcutta.  It will therefore have to be held that the
\ncontrary view taken by these High Courts is not good law.\n<\/p>\n
36.\tIn this view of the matter we see no reason to interfere with the
\nimpugned judgment. The Appeal stands dismissed.\t There will be no
\nOrder as to costs throughout.\n<\/p>\n
…J.\n<\/p>\n
(G.B. PATTANAIK)<\/p>\n
…J.\n<\/p>\n
(S.N. PHUKAN)<\/p>\n
..J.\n<\/p>\n
(S. N. VARIAVA)<\/p>\n
March 13, 2002.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Bhatia International vs Bulk Trading S. A. & Anr on 13 March, 2002 Author: S N Variava Bench: G.B. Pattanaik, S.N. Phukan, S.N. Variava CASE NO.: Appeal (civil) 6527 of 2001 PETITIONER: BHATIA INTERNATIONAL Vs. RESPONDENT: BULK TRADING S. A. & ANR. DATE OF JUDGMENT: 13\/03\/2002 BENCH: G.B. Pattanaik, S.N. Phukan […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-63198","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nBhatia International vs Bulk Trading S. 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