REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.7562 OF 2011
(Arising out of SLP(C) No.25624 of 2010)
YOGRAJ INFRASTRUCTURE LTD. ... APPELLANT
Vs.
SSANG YONG ENGINEERING AND
CONSTRUCTION CO. LTD. ... RESPONDENT
J U D G M E N T
ALTAMAS KABIR, J.
1. Leave granted.
2. The Appellant is a company incorporated under
the Companies Act, 1956, while the Respondent is a
2
company incorporated under the laws of the Republic
of Korea with its registered office at Seoul in
Korea and its project office at New Delhi.
3. On 12th April, 2006, the National Highways
Authority of India, New Delhi (NHAI) awarded a
contract to the Respondent, SSang Yong Engineering
and Construction Co. Ltd., hereinafter referred to
as “SSY”, for the National Highways, Sector II
Project, Package: ABD-II/C-8, for upgradation to
Four Laning of Jhansi-Lakhnadon Section, KM 297 to
KM 351 of NH 26 in the State of Madhya Pradesh.
The total contract amount was 2,19,01,16,805/-.
On 13th August, 2006, SSY entered into a Sub-
Contract with the Appellant Company for carrying
out the work in question. The Work Order of the
entire project was granted to the Appellant by the
Respondent on back-to-back basis. Clause 13 of the
Agreement entered into between the Respondent and
the Appellant provided that 92% of all payments for
3
the work done received by the Respondent from NHAI,
would be passed on to the Appellant. Clauses 27
and 28 provided for arbitration and the governing
law agreed to was the Arbitration and Conciliation
Act, 1996. On 31st October, 2006, the Appellant
furnished a Performance Bank Guarantee for
6,05,00,000/- to the Respondent and it also
invested about 88.15 crores in the project. Three
more Bank Guarantees, totaling 5,00,00,000/-, for
release of mobilization advance were also furnished
by the Appellant on 29th May, 2009. On 22nd
September, 2009, the Respondent Company issued a
notice of termination of the Agreement, inter alia,
on the ground of delay in performing the work under
the Agreement.
4. On account of the above, the Appellant filed an
application before the District and Sessions Judge,
Narsinghpur, Madhya Pradesh, under Section 9 of the
Arbitration and Conciliation Act, 1996, praying for
4
interim reliefs. A similar application under
Section 9 of the above Act was filed by the
Appellant before the same Court on 30th December,
2009, also for interim reliefs. Ultimately, on 20th
May, 2010, the dispute between the parties was
referred to arbitration in terms of the Agreement
and a Sole Arbitrator, Mr. G.R. Easton, was
appointed by the Singapore International
Arbitration Centre on 20th May, 2010. On 4th June,
2010, the Appellant filed an application before the
Sole Arbitrator under Section 17 of the aforesaid
Act being SIAC Arbitration No.37 of 2010, inter
alia, for the following reliefs :
"a. restrain the SSY from encashing
Performance Bank Guarantee
No.101BGPGO63040001 dated 31.10.06 of
Syndicate Bank, Nehru Place, Delhi of
6.05 crores;
b. restrain the SSY from enchashing three
Bank Guarantees furnished towards the
mobilization advance bearing numbers
101 BGFG 091490001 of 1 Crore, 101
BGFG 091490002 of 1 Crore and 101
5
BGFG 091490003 of 3 Crores, totaling
to 5 Crores;
c. direct SSY to release a sum of
144,42,25,884/- along with the
interest @ 36% till realization of
nationalized bank of India for the
aforesaid amount and keep it alive
till passing of the final Award.
d. restrain SSY from removing, shifting,
alienating or transferring in any
manner either itself or through any of
its agents/employees, the plant,
machineries, equipments, vehicles and
materials, in other words maintain
status-quo, till the passing of the
final arbitral award;
e. grant any other appropriate interim
measures of protection in favour of
the Cross-Claimant/applicant, which in
the esteemed opinion of this Hon’ble
Tribunal are just and proper in the
facts and circumstance of the case;”
5. The Respondent also filed an application under
Section 17 of the above Act before the Sole
Arbitrator on 5th June, 2010, for interim reliefs.
After considering both the applications, the
Arbitrator passed an interim order on 29th June,
2010, in the following manner :
6
“1. The respondent is to immediately
release, for use by the Claimant, the
items of plant, machinery and equipment
(PME) numbered 1,5,7,8,10,19,20,21,22,23
and 32, as listed in Annexure A (Machinery
Details) of the Claimant’s Application
dated 5 June 2010.
2. The respondent is restrained from
creating any third party interest in, or
otherwise selling, leasing or charging,
the PME or other assets presently located
at the work site and/or the camp site and
which are owned by the respondent, without
the permission of this Tribunal.
3(i). The claimant is permitted to use
the aggregates, which have been identified
in Annexure D (engineer’s Statement of
Materials at Site for September 2009) of
the Claimant’s Application dated 5 June
2010 as a total quantity of 274,580 cubic
metres, for the carrying out of the works
in accordance with the terms and
conditions of the Main Agreement and the
Agreement dated 13 August, 2006 between
the parties.
3(ii) The respondent is to give the Claimant access to the aggregate stockpiles where the abovementioned
quantity of material is currently held.
The above interim orders are made with the
objective of enabling the construction
work on the project to continue while the
disputes between the parties are resolved
in these arbitration proceedings (ref.
Terms or Reference dated 23 June 2010).
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The parties have liberty at short notice,
if any of the above directions require
clarification or amendment in order to
ensure proper implementation.
The respondent has leave (until 6 July
2010) to make a further application for
the provision of security by the claimant
in relation to the PME and aggregates.”
6. Aggrieved by the aforesaid interim order passed
by the learned Arbitrator, the Appellant herein,
which was the respondent before the learned
Arbitrator, filed Appeal No.2 of 2010 on 2nd July,
2010 before the learned District Judge,
Narsinghpur, under Section 37(2)(b) of the
Arbitration and Conciliation Act, 1996, for setting
aside the same. On behalf of the respondent it was
contended in the said appeal that the same was not
maintainable before the learned District Judge,
Narsinghpur, since the seat of the arbitration
proceedings was in Singapore and the said
proceedings were governed by the laws of Singapore.
Accepting the submissions advanced on behalf of the
8
respondent, the learned District Judge dismissed
the appeal as not maintainable on 23rd July, 2010,
without deciding the matter on merits.
7. The appellant then moved Civil Revision No.304
of 2010, before the High Court on 26th July, 2010.
The same was dismissed by the High Court on 31st
August, 2010, against which the Special Leave
Petition (now appeal) has been filed.
8. Appearing for the Company, Ms. Indu Malhotra,
learned Senior Advocate, submitted that the stand
taken on behalf of the respondent that the PMEs had
to remain on site even in case of termination of
the Agreement, was without any basis, since after
the Agreement dated 13th August, 2006, the parties
had agreed in the Meeting held on 23rd September,
2006 that in case of termination of the Agreement
between the parties, the respondent would transfer
the PMEs to the appellant. Ms. Malhotra further
clarified that Clause 4 of the Agreement related
9
only to the PMEs and not to the aggregates, since
it had been admitted by the respondent that in case
the aggregates were not made available to them,
they could buy the same from the open market. It
was further clarified that there were only two
machines out of 35 machines which formed the
subject matter of the interim application, i.e.,
Hotmix Plant and Crusher, which were in the
possession of the appellant and the value thereof
would be approximately 7 crores and a sum of 7.20
crores had already been deducted by the respondent
towards the repayment of the Arab Bank Loan for the
said PMEs. Ms. Malhotra submitted that it was
incorrect to say that the Project was stopped
because of the Stay Order passed by this Court as
the respondent had further subcontracted the work
to Khara and Tarakunde Infrastructure Pvt. Ltd.,
Ramdin Ultratech Pvt. Ltd. and others. Ms.
Malhotra contended that apart from the Hotmix Plant
and Crusher all the remaining PMEs had been removed
10
by the respondent after the passing of the order
29th June, 2010.
9. On the question of the applicable law in
respect of the arbitral proceedings, Ms. Malhotra
contended that the Arbitration and Conciliation
Act, 1996, enacted in India is the applicable law
of arbitration. Ms. Malhotra submitted that in
terms of the Agreement arrived at between the
parties, it is only the Indian laws to which the
Agreement would be subjected. She pointed out that
Clause 28 of the Agreement provides that the
Agreement would be subject to the laws of India and
that during the period of arbitration, the
performance of the Agreement would be carried out
without interruption and in accordance with its
terms and provisions. Accordingly, having
explicitly agreed that the Agreement would be
subject to the laws of India, from the very
commencement of the arbitration till its
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conclusion, the law applicable to the arbitration
would be the Indian law. In other words, all
interim measures sought to be enforced would
necessarily have to be in accordance with Sections
9 and 37(2)(b) of the 1996 Act.
10. Ms. Malhotra submitted that Clause 27.1, which
forms part of Clause 27 of the agreement, which is
the arbitration clause, provides that the
proceedings of arbitration shall be conducted in
accordance with the SIAC Rules. In other words,
the provisions of SIAC Rules would apply only to
the arbitration proceedings, but not to appeals
from such proceedings. Ms. Malhotra submitted that
the right to appeal from an interim order under
Section 37(2)(b) is a substantive right provided
under the 1996 Act and was not governed by the SIAC
Rules.
11. Ms. Malhotra also urged that Rule 1.1 of the
SIAC Rules, which, inter alia, provides that where
12
the parties agreed to refer their disputes to the
SIAC for arbitration, it would be deemed that the
parties had agreed that such arbitration would be
conducted in accordance with the SIAC Rules. If,
however, any of the SIAC Rules was in conflict with
a mandatory provision of the applicable law of
arbitration from which the parties could not
derogate, that provision from the applicable law of
the arbitration shall prevail. Ms. Malhotra
submitted that Rule 32 of the SIAC Rules is one of
such Rules which provides that if the seat of
arbitration is Singapore, then the applicable law
of arbitration under the Rules would be the
International Arbitration Act, 2002, of Singapore.
However, Section 37(2)(b) of the 1996 Act being a
substantive and non-derogable provision, providing
a right of appeal to parties from a denial of an
interim measure, such a provision protects the
interest of parties during the continuance of
arbitration and as a consequence, Rule 32 of the
13
SIAC Rules which does not provide for an appeal, is
in direct conflict with a mandatory non-derogable
provision contained in Section 37(2)(b) of the 1996
Act.
12. Ms. Malhotra then went on to submit that Part I
of the 1996 Act had not been excluded by Clause 27
of the Agreement and the 1996 Act would, therefore,
apply to the said Agreement. Ms. Malhotra
submitted that in the decision of this Court in
Bhatia International Vs. Bulk Trading S.A. [(2002)
4 SCC 105], which was reiterated in Venture Global
Engg. Vs. Satyam Computer Services Ltd. [(2008) 4
SCC 190] and Citation Infowares Ltd. Vs. Equinox
Corporation [(2009) 7 SCC 220], it has been clearly
held that where the operation of Part I of the 1996
Act is not expressly excluded by the arbitration
clause, the said Act would apply. In any event, in
the instant case, Clause 28 of the Agreement
expressly provides that the Agreement would be
14
subject to the laws of India and that during the
period of arbitration the parties to the Agreement
would carry on in accordance with the terms and
conditions contained therein. Accordingly, on
account of the application of Part I of the 1996
Act, the International Arbitration Act, 2002 of
Singapore would have no application to the facts of
this case, though, the conduct of the proceedings
of arbitration would be governed by the SIAC Rules.
13. Ms. Malhotra urged that the High Court had
erred in coming to the conclusion that since under
Clause 27 of the Agreement, the parties had agreed
that the arbitral proceedings would be conducted in
accordance with the SIAC Rules and by virtue of
Rule 32 thereof, the jurisdiction of the Indian
Courts stood ousted. Ms. Malhotra urged that the
High Court had failed to appreciate the provisions
of Clause 28 of the Agreement while arriving at
such a conclusion. Ms. Malhotra reiterated her
15
earlier submissions that Rule 32 of the SIAC Rules
is subject to Rule 1.1 thereof which provides that
if any of the said Rules was in conflict with the
mandatory provision of the applicable law of the
arbitration, from which the parties could not
derogate, that provision shall prevail. Ms.
Malhotra submitted that the finding of the High
Court being contrary to the provisions agreed upon
by the parties, such finding was liable to be set
aside. Ms. Malhotra submitted that the very fact
that the respondents had approached the District
Court, Narsinghpur, in India and had filed an
application under Section 9 of the 1996 Act
therein, indicated that the respondent also
accepted the applicability of the 1996 Act. Ms.
Malhotra pointed out that in the application the
respondent has indicated as follows :
“That, the work of Contract, which was
executed between the petitioner and
respondent is well within the jurisdiction
of this Hon’ble Court at Narsinghpur.
16
Thus, this Hon’ble Court has jurisdiction
to pass an order on this application under
Section 9 of the Arbitration and
Conciliation Act, 1996.”
14. Ms. Malhotra urged that having regard to
Section 42 of the 1996 Act, it is in the District
Court of Narsinghpur where the application under
Section 9 of the Arbitration and Conciliation Act,
has been filed which has jurisdiction over the
arbitral proceedings at all stages. Ms. Malhotra
pointed out that the High Court had erroneously
held that Section 42 was not applicable to an
appeal and was applicable only for filing an
application, without appreciating the wordings of
Section 42 which provides that Courts shall have
jurisdiction over the arbitral proceedings also.
Ms. Malhotra urged that with regard to the said
findings of the High Court, the order impugned was
liable to be set aside.
17
15. Ms. Malhotra submitted that the stand of the
respondent that in view of clause 27 of the
Agreement, the law governing the arbitral
proceedings would be the SIAC Rules, was not
tenable, in view of Clause 28 which without any
ambiguity provides that the Agreement would be
subject to the laws of India and that during the
period of arbitration the parties to the Agreement
would carry on, in accordance with the terms and
conditions contained therein. Accordingly, it is
the Arbitration and Conciliation Act, 1996, which
would be the proper law or the law governing the
arbitration.
16. Ms. Malhotra submitted that apparently there
was a misconception in the minds of the learned
Judges of the High Court as to the concept of the
`proper law’, of the Arbitration Agreement and the
`Curial Law’ governing the conduct and procedure of
the reference. Ms. Malhotra submitted that while
18
the proper law of the Arbitration Agreement governs
the law which would be applicable in deciding the
disputes referred to arbitration, the Curial law is
the law which governs the procedural aspect of the
conduct of the arbitration proceedings. It was
urged that in the instant case while the proper law
of the arbitration would be the Arbitration and
Conciliation Act, 1996, the Curial law would be the
SIAC Rules of Singapore. Ms. Malhotra submitted
that the said difference in the two concepts had
been considered by this Court in Sumitomo Heavy
Industries Ltd. Vs. ONGC [(1998) 1 SCC 305] and
NTPC Vs. Singer [(1992) 3 SCC 551], in which the
question for decision was what would be the law
governing the arbitration when the proper law of
the contract and the Curial law were agreed upon
between the parties. In the said cases this Court
observed that in many circumstances the applicable
law would be the same as that of the proper law of
contract and the Curial law, but it was not
19
uncommon to encounter the incumbent Curial law in
cases where the parties had made an express choice
of arbitration in a jurisdiction which was
different from the jurisdiction with which the
contract had the closest real connection.
17. Ms. Malhotra submitted that in the absence
of any express choice, the proper law of the
contract would be the proper law of the Arbitration
Agreement. Ms. Malhotra submitted that in the
instant case, admittedly the proper law of contract
is the law of India and since the parties have not
expressly made any choice regarding the law
governing the Arbitration Agreement, the proper law
of contract, namely, the Arbitration and
Conciliation Act, 1996, would be the proper law of
the Arbitration Agreement. Ms. Malhotra urged that
ultimately the right to appeal which is a
substantive right under the 1996 Act would be
governed by the said Act and the instant appeal,
20
is therefore, liable to be allowed, and the order
of the High Court, impugned in the appeal, was
liable to be set aside.
18. Within the fact situation indicated on
behalf of the appellant, Mr. Dharmendra Rautray,
learned Advocate, appearing for the respondent
Company, submitted that the issues involved in the
present appeal were (i) whether the Indian Courts
would have jurisdiction to entertain an appeal
under Section 37 of the Arbitration and
Conciliation Act, 1996, against an interim order
passed by the Arbitral Tribunal with its seat in
Singapore; (ii) Whether the “law of arbitration”
would be the International Arbitration Act, 2002,
of Singapore; and (iii) whether the “Curial law”
would be the laws of Singapore?
19. Mr. Rautray submitted that apparently on the
alleged failure of the appellant to complete the
work awarded under the contract within the
21
stipulated period of 30 months from the date of
commencement of the work, the respondent had to
give an undertaking to the National Highways
Authority of India by way of a Supplementary
Agreement dated 11th February, 2009, to achieve a
monthly rate of progress of work, failing which the
aforesaid authority would be entitled to exercise
all its rights under the main agreement and even to
terminate the same with immediate effect. Mr.
Routray submitted that on account of the failure of
the appellant to live up to its commitments, the
respondent who had suffered heavy financial loss
and damages on account of such breach, issued
notice of termination on 22nd September, 2009,
pursuant to Clause 23.2 of the Agreement.
20. Thereafter, the parties entered into settlement
talks, as provided for in Clause 26 of the
Agreement and signed the minutes of the meeting
dated 28th September, 2009. The settlement talks
22
between the parties having failed, the
respondent/claimant, invoked Clause 27 of the
Agreement for reference of the disputes to
arbitration in accordance with the Singapore
International Arbitration Centre Rules (SIAC
Rules). The respondent/claimant filed a Statement
of Claim on 16th August, 2010, before the Sole
Arbitrator, Mr. Graham Easton, claiming a sum of
221,36,91,097/- crores from the appellant. Both
the parties filed applications before the learned
Arbitrator seeking interim relief under Rule 24 of
the SIAC Rules on 5th June, 2010. In their
application for interim relief under Rule 24 of the
SIAC Rules, the respondent, inter alia, prayed for
release of all plants, machineries and equipment
belonging to the respondent; injunction against the
appellant from removing all plants, machineries,
equipment, materials, aggregates, etc., owned by
the respondent from the work site and/or camp site;
a restraint order against the appellant from
23
creating any third party interest or otherwise
sell, lease, charge the plants, machineries,
equipment, materials, etc., at the work site and/or
camp site and to permit the respondent to use the
PMEs and materials, aggregates, etc., for carrying
out the works in accordance with the terms and
conditions of the main Agreement and the
Supplementary Agreement dated 13th August, 2006.
21. The Sole Arbitrator appointed by the SIAC by
its order dated 29th June, 2010, directed the
appellant to, inter alia, release for use by the
respondent all plants and equipment. The appellant
was also restrained from creating any third party
interest, or otherwise to deal with the properties
at the work site and/or camp site and permit the
respondent to use the aggregates of a total
quantity of 27,580 cubic metres for carrying out
the works. The Sole Arbitrator, while dealing with
the applications filed by both the parties under
24
Rule 24 of the SIAC Rules, also recorded that the
interim orders were being made with the object of
allowing the construction work on the project to
continue while the dispute between the parties were
resolved in these arbitration proceedings and in
order to ensure that the progress of the project
was not hampered, while the parties waited for the
outcome of the arbitration proceedings.
22. Mr. Routray submitted that the appeal filed
by the appellant before the District Court,
Narasinghpur, under Section 37 of the Arbitration
and Conciliation Act, 1996, against the
abovementioned order of the learned Arbitrator
dated 29th June, 2010, was dismissed on 23rd July,
2010, on the ground of maintainability and lack of
jurisdiction. The Civil Revision filed against the
said order was dismissed by the Madhya Pradesh High
Court by its order dated 31st August, 2010. While
dismissing the Revision, the High Court, inter
25
alia, observed that under Clause 27.1 of the
Agreement, the parties had agreed to resolve their
dispute under the provisions of SIAC Rules which
expressly or, in any case, impliedly also adopted
Rule 32 of the said Rules which categorically
indicates that the law of arbitration under the
said Rules would be the International Arbitration
Act, 2002, of Singapore. The Special Leave
Petition, out of which the present appeal arises,
has been filed by the appellant against the said
order dated 31st August, 2010.
23. Mr. Routray further submitted that the
parties had, inter alia, agreed that the seat of
arbitration would be Singapore and that the
arbitration proceedings would be continued in
accordance with the SIAC Rules, as per Clause 27.1
of the Agreement. It was also agreed that the
proper law of the agreement/contract dated 13th
August, 2006, between the appellant and the
26
respondent would be the Indian law and the proper
law of the arbitration would be the Singapore law.
24. Mr. Routray submitted that an application
under Section 9 of the 1996 Act was filed before
the District Court on 30th December, 2009, prior to
the date of invocation of the arbitration
proceedings and before the Curial law, i.e., the
Singapore law, became operative. On the said
application, the District Judge by his order dated
10th March, 2010, directed the applicant to submit
its case before the Arbitrator at Singapore. Mr.
Routray pointed out that in the present case, the
parties had expressly chosen the applicable laws to
each legal disposition while entering into the
Agreement dated 13th August, 2006. Mr. Routray
submitted that the parties had expressly agreed
that the proper law of the contract would be the
Indian Law, the proper law of the arbitration would
be the Singapore International Arbitration Act,
27
2002 and the Curial law would be Singapore law,
since the seat of arbitration was in Singapore.
Mr. Routray submitted that as observed by this
Court in Sumitomo Heavy Industries Ltd. Vs. ONGC
Ltd. & Ors. [(1998) 1 SCC 305], the Curial law,
besides determining the procedural powers and
duties of the Arbitrators, would also determine
what judicial remedies are available to the
parties, who wished to apply for security for costs
or for discovery or who wished to challenge the
Award once it had been rendered and before it was
enforced.
25. As to the filing of Application under
Section 9 by the appellant before the District
Court at Narsinghpur, Mr. Routray submitted that
the High Court had correctly held that the
proceedings had been initiated by the parties in
the Court of District Judge, Narasinghpur, before
the matter was referred to the Arbitrator and the
28
same was decided taking into consideration such
circumstances. However, once the dispute was
referred to the Arbitrator, the parties could not
be permitted to deviate from the express terms of
the Agreement under which the SIAC Rules came into
operation.
26. Mr. Routray submitted that the Section 9
application had been filed before the Curial law
became operative and in view of the agreement
between the parties the Indian Arbitration and
Conciliation Act, 1996, would not apply to the
arbitration proceedings and the same would be
governed by the Singapore laws.
27. Mr. Routray then proceeded to the next
important question as to whether choice of the
“seat of arbitration” by the parties confers
exclusive jurisdiction on the Courts of the seat of
arbitration to entertain matters arising out of the
contract. Learned counsel submitted that choice of
29
the seat of arbitration empowered the courts within
the seat of arbitration to have supervisory
jurisdiction over such arbitration. Mr. Routray
has referred to various decisions of English Courts
which had laid down the proposition that even if
the arbitration was governed by the law of another
country, it would not entitle the objector to mount
a challenge to the Award in a country other than
the seat of arbitration. It is not necessary to
refer to the said judgments for a decision in this
case.
28. Mr. Routray submitted that the decision of this
Court in NTPC Vs. Singer (supra) relates to the
applicability of the Indian Arbitration Act, 1940,
and the Foreign Awards (Recognition and
Enforcement) Act, 1961, to a foreign award sought
to be set aside in India under the provisions of
the 1940 Act. It was submitted that the said
decisions have no relevance to the question raised
30
in the present case which raises the question as to
whether the Indian Courts would have jurisdiction
to entertain an appeal under Section 37 of the 1996
Act against an interim order of the Arbitral
Tribunal, despite the parties having expressly
agreed that the seat of arbitration would be in
Singapore and the Curial law of the arbitration
proceedings would be the laws of Singapore. Once
again referring to the decision in the NTPC case,
Mr. Routray submitted that in paragraph 46 of the
judgment, this Court had, inter alia, observed that
Courts would give effect to the choice of a
procedural law other than the proper law of
contract only where the parties had agreed that the
matters of procedure should be governed by a
different system of law. Mr. Routray submitted
that in the above-mentioned case, this Court was
dealing with a challenge to a “domestic award” and
not a “foreign award”. Section 9(b) of the Foreign
Awards (Recognition and Enforcement) Act, 1961,
31
provides that the said Act would not apply to an
award, although, made outside India, but which is
governed by the laws of India. Accordingly, all
such awards were treated as domestic awards by the
1961 Act and any challenge to the said award,
could, therefore, be brought only under the
provisions of the 1940 Act. Mr. Routray further
submitted that the law of arbitration in the NTPC
case (supra) was Indian law as opposed to the facts
of the present case, where the parties had agreed
that the law of arbitration would be the
International Arbitration Act, 2002, of Singapore.
29. Mr. Routray urged that by virtue of Clause 27
of the Agreement dated 13th August, 2006, and by
accepting the SIAC Rules, the parties had agreed
that Part I of the Arbitration and Conciliation
Act, 1996, would not apply to the arbitration
proceedings taking place in Singapore. According
to Mr. Routray, the said decision was reiterated in
32
the Terms of Reference that the arbitration
proceedings would be governed by the laws of
Singapore. Mr. Routray further urged that even in
the decision relied upon by the appellant in the
case of Bhatia International, this Court had held
that parties by agreement, express or implied,
could exclude all or any of the provisions of Part
I of the 1996 Act. Consequently, in Bhatia
International this Court had held that exclusion of
Part I of the 1996 Act could be by virtue of the
Rules chosen by the parties to govern the
arbitration proceedings.
30. As far as applicability of Section 42 of the
1996 Act is concerned, the Jabalpur Bench of the
Madhya Pradesh High Court had held that by express
agreement parties had ousted the jurisdiction of
the Indian Courts, while the arbitration
proceedings were subsisting. Accordingly, the
jurisdiction of the Indian Courts stood ousted
33
during the subsistence of the arbitration
proceedings and, accordingly, it is only the laws
of arbitration as governed by the SIAC Rules which
would govern the arbitration proceedings along with
the procedural law, which is the law of Singapore.
31. In order to appreciate the controversy that has
arisen regarding the applicability of the
provisions of Part I of the Arbitration and
Conciliation Act, 1996, to the proceedings being
conducted by the Arbitrator in Singapore in
accordance with the SIAC Rules, it would be
necessary to look at the arbitration clause
contained in the agreement entered into between the
parties on 13th August, 2006. Clause 27 of the
Agreement provides for arbitration and reads as
follows :
“27. Arbitration.
27.1 All disputes, differences arising
out of or in connection with the Agreement
shall be referred to arbitration. The
34
arbitration proceedings shall be conducted
in English in Singapore in accordance with
the Singapore International Arbitration
Centre (SIAC) Rules as in force at the
time of signing of this Agreement. The
arbitration shall be final and binding.
27.2 The arbitration shall take place in
Singapore and be conducted in English
language.
27.3 None of the Party shall be entitled
to suspend the performance of the
Agreement merely by reason of a dispute
and/or a dispute referred to arbitration.”
32. Clause 28 of the Agreement describes the
governing law and provides as follows :
“This agreement shall be subject to the
laws of India. During the period of
arbitration, the performance of this
agreement shall be carried on without
interruption and in accordance with its
terms and provisions.”
33. As will be seen from Clause 27.1, the
arbitration proceedings are to be conducted in
Singapore in accordance with the SIAC Rules as in
force at the time of signing of the agreement.
There is, therefore, no ambiguity that the
35
procedural law with regard to the arbitration
proceedings, is the SIAC Rules.
34. Clause 27.2 makes it clear that the seat of
arbitration would be Singapore.
35. What we are, therefore, left with to consider
is the question as to what would be the law on the
basis whereof the arbitral proceedings were to be
decided. In our view, Clause 28 of the Agreement
provides the answer. As indicated hereinabove,
Clause 28 indicates that the governing law of the
agreement would be the law of India, i.e., the
Arbitration and Conciliation Act, 1996. The
learned counsel for the parties have quite
correctly spelt out the distinction between the
“proper law” of the contract and the “curial law”
to determine the law which is to govern the
arbitration itself. While the proper law is the
law which governs the agreement itself, in the
absence of any other stipulation in the arbitration
36
clause as to which law would apply in respect of
the arbitral proceedings, it is now well-settled
that it is the law governing the contract which
would also be the law applicable to the Arbitral
Tribunal itself. Clause 27.1 makes it quite clear
that the Curial law which regulates the procedure
to be adopted in conducting the arbitration would
be the SIAC Rules. There is, therefore, no
ambiguity that the SIAC Rules would be the Curial
law of the arbitration proceedings. It also
happens that the parties had agreed to make
Singapore the seat of arbitration. Clause 27.1
indicates that the arbitration proceedings are to
be conducted in accordance with the SIAC Rules.
The immediate question which, therefore, arises is
whether in such a case the provisions of Section
2(2), which indicates that Part I of the above Act
would apply, where the place of arbitration is in
India, would be a bar to the invocation of the
provisions of Sections 34 and 37 of the Act, as far
37
as the present arbitral proceedings, which are
being conducted in Singapore, are concerned.
36. In Bhatia International (supra), wherein while
considering the applicability of Part I of the 1996
Act to arbitral proceedings where the seat of
arbitration was in India, this Court was of the
view that Part I of the Act did not automatically
exclude all foreign arbitral proceedings or awards,
unless the parties specifically agreed to exclude
the same.
37. As has been pointed out by the learned Single
Judge in the order impugned, the decision in the
aforesaid case would not have any application to
the facts of this case, inasmuch as, the parties
have categorically agreed that the arbitration
proceedings, if any, would be governed by the SIAC
Rules as the Curial law, which included Rule 32,
which categorically provides as follows :
38
“Where the seat of arbitration is
Singapore, the law of the arbitration
under these Rules shall be the
International Arbitration Act (Cap. 143A,
2002 Ed, Statutes of the Republic of
Singapore) or its modification or re-
enactment thereof.”
38. Having agreed to the above, it was no longer
available to the appellant to contend that the
“proper law” of the agreement would apply to the
arbitration proceedings. The decision in Bhatia
International Vs. Bulk Trading S.A. [(2002) 4 SCC
105], which was applied subsequently in the case of
Venture Global Engg. Vs. Satyam Computer Services
Ltd. [(2008) 4 SCC 190] and Citation Infowares Ltd.
Vs. Equinox Corporation [(2009) 7 SCC 220], would
have no application once the parties agreed by
virtue of Clause 27.1 of the Agreement that the
arbitration proceedings would be conducted in
Singapore, i.e., the seat of arbitration would be
in Singapore, in accordance with the Singapore
International Arbitration Centre Rules as in force
39
at the time of signing of the Agreement. As
noticed hereinabove, Rule 32 of the SIAC Rules
provides that the law of arbitration would be the
International Arbitration Act, 2002, where the seat
of arbitration is in Singapore. Although, it was
pointed out on behalf of the appellant that in Rule
1.1 it had been stated that if any of the SIAC
Rules was in conflict with the mandatory provision
of the applicable law of the arbitration, from
which the parties could not derogate, the said
mandatory provision would prevail, such is not the
case as far as the present proceedings are
concerned. In the instant case, Section 2(2) of
the 1996 Act, in fact, indicates that Part I would
apply only in cases where the seat of arbitration
is in India. This Court in Bhatia International
(supra), while considering the said provision, held
that in certain situations the provision of Part I
of the aforesaid Act would apply even when the seat
of arbitration was not in India. In the instant
40
case, once the parties had specifically agreed that
the arbitration proceedings would be conducted in
accordance with the SIAC Rules, which includes Rule
32, the decision in Bhatia International and the
subsequent decisions on the same lines, would no
longer apply in the instant case where the parties
had willingly agreed to be governed by the SIAC
Rules.
39. With regard to the effect of Section 42 of the
Arbitration and Conciliation Act, 1996, the same,
in our view was applicable at the pre-arbitral
stage, when the Arbitrator had not also been
appointed. Once the Arbitrator was appointed and
the arbitral proceedings were commenced, the SIAC
Rules became applicable shutting out the
applicability of Section 42 and for that matter
Part I of the 1996 Act, including the right of
appeal under Section 37 thereof.
41
40. We are not, therefore, inclined to interfere
with the judgment under appeal and the appeal is
accordingly dismissed and all interim orders are
vacated.
41. There will be no order as to costs.
…………………………………………J.
(ALTAMAS KABIR)
…………………………………………J.
(CYRIAC JOSEPH)
New Delhi
Dated:01.09.2011
