Katra Holdings Limited vs Corsair Investments Llc And 5 Ors
2017 Latest Caselaw 7200 Bom

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               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                  ORDINARY ORIGINAL CIVIL JURISDICTION

                      ARBITRATION PETITION NO. 436 OF 2016

Katra Holdings Limited                                 .. Petitioner
      Vs.
Corsair Investments LLC & Ors.                         .. Respondents

Mr.Ashish Singh i/b Shrikrishna R. Ganbavale for Petitioner.

Mr.Aspi Chinoy, senior advocate a/w. Ms.Ankita Singhania                      i/b Shital
Turakhia for Respondent No.1.

Mr.Chandrakant R. Mhadeshwar for Respondent No.3.

Ms. Ankita Singhania i/b i/b Abhijeet A. Desai for Respondent No.6.

                      CORAM                : K.R.SHRIRAM, J.

                      RESERVED ON          : 13TH SEPTEMBER 2017
                      PRONOUNCED ON        : 15TH SEPTEMBER 2017

P.C.

1            Petitioner has approached this Court challenging a Final Award dated

11th September 2015 by which Petitioner's claims against respondents were

dismissed. The claims against Respondent Nos.1 and 2 were dismissed as

not having been established and against Respondent Nos.3 to 6 were

dismissed on the ground that the said Respondents were not parties to the

Arbitration Agreement.

I            BACKGROUND AND BRIEF FACTS :

2            The dispute is in respect of equity shares in Tamilnad Mercantile

Shraddha Talekar PS                                                                    1/22




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Bank Limited ("TMB"). The counsel for Petitioner submitted that he is

challenging the Award only under Section 34(2)(ii)(b) of the Arbitration and

Conciliation Act, 1996 that the Award is against Public Policy.

3 This relates to a dispute resolution provision of an amended and

Restated Escrow and Transaction Settlement Agreement dated 12 th May

2007 between Petitioner and Respondent Nos.1 and 2.

The Escrow Agreement is one of a number of documents that relate to

a complex series of transactions involving shares of TMB, a commercial

bank based in southern India (collectively, the "Transaction"). The

Transaction began with an Agreement for Assignment dated March 2, 2006,

pursuant to which one Mr.M.G.M.Maran, on behalf of himself and Mr.B.

Ramachandra Adityan, assigned the rights they had acquired to 95,418 TMB

shares (33.6% of the issues and paid-up equity shares) that previously were

owned by what is referred to as the "Sterling Group" of Indian investors

under an earlier Sale Agreement. Messrs. Maran and Adityan assigned their

rights to Katra India (defined to include "its parent, associates, affiliates,

legal heirs, assignees, nominees, administrators, receivers and successors")

and agreed to attempt to obtain and assign an additional 17% of TMB's

shares to Katra India ( for a total of 50.6 %).

Shraddha Talekar PS                                                                   2/22




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4            The Agreement for Assignment contained a number of important

provisions and among them was a grant by Mr.Maran to Katra India

including Petitioner of a right or "mandate", exclusive for a period of 180

days, to arrange for "placement" of the TMB shares with "appropriate

financial investors......... in compliance with guidelines and regulations

issues by the Reserve Bank of India".

5 After a series of negotiations and agreements, on December 29, 2006

the Petitioner entered into an agreement with Corsair and SCB Mauritius,

i.e., Respondent No.1 and Respondent No.2 pursuant to which Petitioner

agreed to deposit into escrow and use "all reasonable efforts to arrange to

sell" TMB shares representing 40% of the outstanding shares on that date to

a number of "Purchasing Entities" identified by Respondent No.1 and listed

in an annex to the Placement Agreement. Subject to the satisfaction or

waiver of certain specified conditions, Petitioner agreed that it would "cause

[the TMB shares] to be sold to the Purchasing Entities, which would

purchase them "severally and not jointly".

6 The three parties to the Placement Agreement agreed to establish

escrow arrangements for the deposit, holding and release of TMB shares to

Purchasing Entities as payment for them was made and all appropriate RBI-

Shraddha Talekar PS                                                                   3/22




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mandated procedures were complied with. The Placement Agreement is

governed by the law of the State of New York, and disputes arising out of or

connected with it are subject to the jurisdiction of specified New York

Courts.

7 The Escrow Agreement, under which this dispute arises and which

amended and restated an earlier Escrow and Transaction Settlement

Agreement dated as of March 30, 2007, established and further defined the

mechanisms by which the Transaction as agreed in the Placement

Agreement and related documents was to be carried out. It was amended by

Amendment No.1, dated April 15, 2008, which among other things provided

that Broad Street Group LLC and GHI I Ltd. no longer were parties to the

Escrow Agreement.

8 The Escrow Agreement thus governs aspects of the Transaction after

it was well in progress. It states that it "supersedes, cancels and replaces"

the Placement Agreement under which Petitioner and Respondent No.1

initially agreed on the deposit and sale of TMB shares. The Parties'

affirmative obligations under the Escrow Agreement are specific and

include detailed directions for the operation of escrow provisions of

Closings to transfer 108,728 TMB shares that by then had been deposited in

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an escrow account with Respondent No.2, i.e., SCB Mauritius, together

with the relevant Transfer Deeds. Paragraph 18.6 of the Agreement provides

that Petitioner shall cause an aggregate of 113,782 Bank shares, together

with all necessary instruments of transfer duly endorsed in blank, to be

deposited into the Escrow Account."

II.          DISPUTE RESOLUTION AND GOVERNING LAW

9            Section 15 of the Escrow Agreement, entitled "DISPUTE

RESOLUTION", states :

15.1 Each of Corsair, Katra and the Escrow and Transaction Settlement Agent (the "Arbitrating Parties") agree to negotiate in good faith to resolve any dispute, difference or claim among the Arbitrating Parties arising out of or in connection, with the Agreement, including the construction, validity, execution, performance, termination or breach hereof. If negotiations do not resolve and dispute, difference or claim to the reasonable satisfaction of the Arbitrating Parties within 12 (fifteen) Business days of their initiation, then the Arbitrating Parties shall submit to biding arbitration. The arbitration shall be conducted according to the Commercial Arbitration Rules of the American Arbitration Association. The place of arbitration shall be New York, New York or such other place as may be agreed upon by the Arbitrating Parties. The Arbitrating Parties shall attempt to agree upon one arbitrator, but if they are unable to agree, each of Arranger, Corsair and the Escrow and Transaction Settlement Agent shall appoint an arbitrator and the total number of arbitrators shall be three. Expenses of the arbitrator(s) shall be divided equally between the Arbitrating Parties to such arbitration.

Judgment upon the award rendered by the arbitrator (s) may be entered in any court having jurisdiction thereof, and shall be enforceable against the Arbitrating Parties in accordance with the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, as amended.

15.2 The arbitrators shall issue a written statement of their award detailing the facts and reasons upon which their decision was based.

15.3 Any reference of any dispute, difference or claim to arbitration

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under this Agreement shall not affect the performance by the Arbitrating Parties of their respective obligations under this Agreement other than the obligations relating to the dispute, difference or claim referred to arbitration.

... (emphasis supplied)

10 Paragraph 16 of the Escrow Agreement, entitled "GOVERNING LAW", states :

This agreement shall be governed and construed in accordance with the laws of India; provided however, that, in the case of Clauses 4.7, 12.3, 14.1.7, 14.1.8, 18.6 and 18.7 hereof and this proviso, New York law shall apply notwithstanding any conflicts of law principles thereof, and each of Corsair, Arranger, BroadStreet and Gupta irrevocably and unconditionally (severally) agree to the application of New York and submission to New York jurisdiction with respect to such clauses (in accordance with, without limitation, Sections 5-1401 and 5-1402 of the General Obligations Law of State of New York).

                                                                 ... (emphasis supplied)


III.         ARBITRATION PROCEEDINGS AND AWARD :

11           Petitioner commenced this arbitration on 16th April 2012 and filed the

Statement of Claim on 22nd May 2012. Respondent No.1 filed their defence

and also Counterclaim on 28th June 2012 in which Respondent Nos.1 and 3

objected to the arbitral tribunal's jurisdiction. Respondent Nos. 2, 4, 5 and 6

also filed their defence and counterclaim on 28 th June 2012 in which they

also challenged the jurisdiction of the arbitral tribunal. Three Arbitrators

were selected in accordance with the Escrow Agreement. Two of them were

based in New York and one was from London, United Kingdom. The

Arbitrators gave a Final Award as under :

VIII. AWARD

WHEREFORE, for the reasons set forth above, we hereby declare and AWARD as follows :

Shraddha Talekar PS                                                                            6/22




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237 All claims against Corsair Capital LLC, Standard Chartered Bank Plc., Standard Chartered Bank and Subcontinental Equities Limited, Mauritius are dismissed based on absence of jurisdiction.

238 The arbitration agreement contained in the Escrow Agreement (as amended by Amendment No.1) is valid and binding as among Katra Holdings Ltd., Corsair Investments LLC and Standard Chartered Bank (Mauritius) Limited, as this Tribunal has jurisdiction pursuant to Article 15 of the Escrow Agreement in respect of disputes failing within the scope of that Agreement.

239 The Escrow Agreement (as amended by Amendment No.1) is valid and binding as among Katra Holding Ltd., Corsair Investments LLC and Standard Chartered Bank (Mauritius) Limited.

240 All claims submitted in this arbitration by Katra Holdings Ltd., against Corsair Investments LLC and/or Standard Chartered Bank (Mauritius) Limited are denied.

241 Katra Holdings Ltd. is directed to deposit into escrow all necessary transfer documentation for the 4,733 shares that it has deposited into escrow pursuant to the Agreement without transfer deeds and for which Purchasing Entities have paid.

242 Katra Holdings Ltd. shall pay to Corsair Investment LLC and Corsair Capital LLC the sum of $ 6, 384, 784.03 as their reasonable costs of this arbitration, together with interest thereon running from the date 30 days after the date of transmission of this Final Award to it at a rate of 3% per annum.

243 Katra Holdings Ltd. shall pay to Standard Chartered Bank (Mauritius) Limited, Standard Chartered Bank Plc., Standard Chartered Bank and Subcontinental Equities Limited the sum of $5,529,364.00 as their reasonable costs of this arbitration, together with interest thereon running from the date 30 days after the date of transmission of this Final Award to it at a rate of 3% per annum.

244 The administrative fees and expenses of the International Centre for Dispute Resolution ("ICDR") totalling $ 75,750,00, and the compensation and expenses of the Arbitrators totalling $826,293.63, shallbe borne one-third each by Katra Holdings Ltd., Corsair Investments LLC and Standard Chartered Bank (Mauritius) Limited shall pay to Corsair Investments LLC the sum of $1,224.43 and also shall pay to Katra Holdings Ltd. the sum of $2,581.29.

245 This Final Award is in full settlement of all claims and counterclaims submitted in this arbitration.

Shraddha Talekar PS                                                                              7/22




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We hereby certify, for the purpose of Article 1 of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Awards, that this Final Award was made in New York, N.Y., United States of America.

IV           SUBMISSIONS AND FINDINGS :

12           Respondents have raised a preliminary objection challenging the

jurisdiction of this Court on the ground that the juridical seat was outside

India and therefore Part-I of the Arbitration and Conciliation Act, 1996 (the

Act) would not be applicable and consequently the petition under Section 34

is not maintainable. If this objection of Respondents is accepted then this

Court will not be required to go into the grounds of challenge to the Award.

Counsel also made submissions only on this preliminary issue and if the

Court was to conclude on this preliminary issue against Respondents, then

another date might have been fixed to hear on the grounds of challenge to

the Award.

13 It is settled law that if the Court comes to a determination that the

juridical seat is outside India, Part-I of the Arbitration and Conciliation Act,

1996 will not be applicable and consequently petition under Section 34 also

is not maintainable. The first issue, therefore, that is required to be

determined is whether the juridical seat was in India as submitted by

Mr.Singh, counsel for Petitioner or outside India as submitted by

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Mr.Chinoy, senior counsel for Respondent No.1.

14 The jurisdiction clauses as averred in the petition are at paragraphs 50

and 51 and they read as under :

"50 The Agreement was in relation to movable property situate in India, being shares in an Indian sector bank, and has been performed in India, where the escrow accounts created under the Agreement, were operated - at Standard Chartered Bank, Mumbai Branch, an affiliate of Respondent Nos.2, 4, 5 and 6 herein. Article 16 of the Agreement provides that the Agreement is governed by the laws of India, and following National Thermal Power Corporation V. Singer Company and Ors., (1992) 3 SCC 551 and Sumitomo Heavy Industries Limited v. ONGC Ltd. & Ors., (1998) 1 SCC 305, the arbitration agreement is also governed by the law of India. Article 15 of the Agreement contains the arbitration agreement which does not stipulate the Seat. It specifies the place of arbitration as "New York or such other place as may be agreed upon by the Parties." and is thus a reference only to the venue of arbitration in terms of the law declared by the Hon'ble Supreme Court in Enercon India Limited & Ors. V. Enercon GmbH and Anr., (2014) 5 SCC 1. Even if it is held to be reference to the seat, the seat has not been fixed under the Agreement. In terms of paragraph 197 of the Judgment of the Hon'ble Supreme Court in Bharat Aluminium Company & Orsr., V. Kaiser Aluminium Technical Services Inc. & Ors., (2012) 9SCC 552, the arbitration agreement is governed by the law declared in Bhatia International V. Bulk Trading S.A. & Anr., (2002) 4 SCC 105, in particular paragraph 32 thereof. Paragraph 32 of Bhatia V. Bulk Trading (ibid) has been explained and clarified by the Hon'ble Supreme Court in Union of India V. Reliance Industries Ltd. & Anr., 2015(5) Arb. LR 255 (SC), in terms whereof since the arbitration agreement in the present case is governed by Indian laws and the seat has not been fixed or agreed, and all other relevant factors are in India, Part I of the Arbitration and Conciliation Act, 1996 applies. In any event, the Arbitration Agreement is governed by Indian law under clause 16. Only clauses specifically mentioned in clause 16 are governed by New York Law. Clause 15.1 which contains Arbitration Agreement is not one of the clauses mentioned in Clause 16, which are excluded from the application of Indian laws and governed by New York Law.

51 As aforesaid, in terms of clause 2.3.1(ii), the Escrow accounts are maintained by the Standard Chartered Bank, India at its Mumbai Branch. All monies are received and paid out of the said Escrow accounts and all shares along with transfer forms are also physically held in Mumbai. This Hon'ble Court, therefore, is the "Court" within

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the meaning of Court as defined in Section 2(e) of the said Act, has the jurisdiction to entertain, try and dispose of the present petition."

15 Therefore, according to Petitioner as Article 16 of the Agreement

provides that the Agreement is governed by the laws of India and as Article

15 of the Agreement containing the arbitration clause does not stipulate the

Seat, arbitration is deemed to have been held in India. It is the Petitioner's

case that Article 15 specifying the place of arbitration "New York or such

other place as may be agreed upon by the parties" is only a reference to the

venue of arbitration and not 'a Seat' and in any event, if it is held to be a

reference to a seat, the seat has not been fixed under the agreement. Because

it says "..................or such other place.........." According to Petitioner and

as submitted by counsel, since the law governing clause in the present case

provides the agreement shall be governed by laws of India and the seat has

not been fixed or agreed and as all other relevant factors are in India, Part-I

of the Arbitration and Conciliation Act, 1996 applies.

16 Mr.Singh also submitted that only certain clauses in the agreement are

governed by New York law and arbitration agreement is not one of those

clauses mentioned in Clause 16 which are excluded by Indian laws and

governed by New York laws.

Shraddha Talekar PS                                                                           10/22




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17           Mr.Chinoy for Respondent No.1, per contra, submitted that :

(i) Part-I of the Act does not apply because Clause 15 of the

agreement provides that the arbitration shall be conducted according to the

Commercial Arbitration Rules of the American Arbitration Association; the

place of arbitration shall be New York or such other place as may be agreed

upon by the Arbitrating Parties; and the award shall be enforceable in

accordance with 1958 Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, as amended.

(ii) Clause 16, which deals with governing law, only applies to the

substantial or proper law of the agreement and not Curial law or procedural

law governing the arbitration proceedings.

(iii) The Curial Law was foreign law because of what is stated in

Clause 15 and therefore Part -I of the Arbitration and Conciliation Act, 1996

would not apply.

(iv) Relying on Clause 15 of the agreement, Mr.Chinoy submitted

that since the juridical seat of arbitration is New York, the Curial Law was

the Federal Arbitration Act, U.S.A.

(v) Admittedly, the arbitration was commenced by Petitioner in

New York and not any other place and therefore, Petitioner is wrong in

submitting that the seat has not been fixed under the agreement because the

clause expressly provided New York and if not New York, some other place

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which the parties may agree upon. It only gives a liberty to the parties to

agree to alternative place of arbitration and as Petitioner itself commenced

arbitration is New York, the place of arbitration shall be New York.

18 Mr.Chinoy further submitted that Petitioner had purported to join

Respondent No.3 to Respondent No.6 as parties to arbitration proceedings

even though Respondent Nos.3 to 6 were admittedly not signatories to the

agreement. When respondent nos.3 to 6 moved an application before the

Arbitral Tribunal objecting to the Tribunal's jurisdiction, Petitioner in its

response relied on the Federal Arbitration Act, U.S.A. as under :

"118. Although Corsair Capital, Standard Chartered Plc, and Subcontinental are not express signatories to the Amended Escrow Agreement, they are nonetheless bound to arbitrate this dispute under the Federal Arbitration Act and prevailing New York law.

119. New York law recognizes that a non-signatory can be bound to an arbitration agreement under one or more of five theories; (i) incorporation by reference, (ii) assumption, (iii) agency, (iv) veil piercing/alter ego, and (v) estoppel. Anyone of these theories suffices to continue to hold these parties into this arbitration."

19 It was also submitted by Mr.Chinoy that even for the post hearing

brief, Petitioner had stated that the joinder of parties of arbitration is a

procedural matter, to be considered under US law. He added, when a dispute

arose between the Petitioner and respondents as to the nomination of

Arbitrators, Petitioner's stand was "we may also seek relief in aid of

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arbitration from the Courts of the State of New York.". Mr.Chinoy submitted

that Petitioner in its Statement of Claim and subsequent amendments thereto

asserted that Petitioner intends to commence a separate Court proceedings

in New York State Supreme Court challenging the validity of the

Appointment Provision and seeking rescission or reformation thereof and

hence Petitioner itself considered the Courts in New York to have

jurisdiction over the disputes between the parties pertaining to the

arbitration proceedings.

20           In short, Mr.Chinoy submitted that :

              (i)     The arbitration was seated in New York, U.S.A.

(ii) The arbitration was conducted in accordance with the American Arbitration Association Rules.

(iii) As the choice of a seat confers exclusive jurisdiction on Courts of the seat of arbitration and carries with it that Court's Supervisory jurisdiction over the arbitration and as Parties having agreed that the seat would be New York, USA, the arbitration being seated in New York, USA, the Federal Arbitration Act was ipso jure the law applicable to the arbitration/arbitration proceedings;

(iv) The Petitioners had in fact relied on the Federal Arbitration Act to justify their joinder of Respondent No.3 to Respondent No.6 and also indicated their intent to challenge the Appointment Provisions in the Courts of New York.

Shraddha Talekar PS                                                                       13/22




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              (v)     The Award was made in New York.

(vi) The Federal Arbitration Act contains provisions for challenging/vacating award made in the USA;

(vi) The Agreement itself provided that the Award would be enforced "in accordance with the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards"; and

(viii) The applicability of Part I of the Arbitration Act has necessarily been impliedly excluded.

21 It should be noted that no rejoinder has been filed to the affidavit in

reply.

22 In support of his submission, Mr.Chinoy relied upon :-

(i) Harkirat Singh Vs. Rabobank International Holdings B.V.1

(ii) Union of India Vs. Reliance Industries Limited & Ors.2

(iii) Eitzen Bulk A/s Vs. Ashapura Minechem Ltd.3

(iv) Harmony Innovation Shipping Limited Vs. Gupta Coal India Limited & Anr.4

23 In rejoinder, Mr. Singh appearing for Petitioner only dealt with Eitzen

Bulk (supra) and submitted that the judgment is not applicable to our case

because in Eitzen Bulk (supra), the contract provided that the arbitration is to 1 2015 SCC OnLine Bom. 605 2 (2015) 10 SCC 213 3 2016 SCC OnLine SC 523 4 (2015) 9 SCC 172

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be settled in London and English Law to apply whereas in our case, Clause

16 says Indian law to apply. The counsel also submitted that even in

Harmony Innovation (supra), it provides arbitration in London and the

contract to be governed and construed according to English Law and hence

this judgment also is distinguishable.

It should be noted that no submissions were made by counsel for

Respondent No.3 and Respondent No.6

24 As stated earlier, it is settled law that where the Court comes to a

determination that the juridical seat is outside India or where law other than

Indian law governs the arbitration agreement, Part-I of the Arbitration Act,

1996 would be excluded. [Union of India Vs. Reliance Industries Limited &

Ors.(supra)].

25 A matter similar to the matter in hand was decided by a Division

Bench of our Court in Harkirat Singh Vs. Rabobank International Holdings

B.V (supra) in which the Division Bench held that parties may choose a

particular place of arbitration because it is attractive place for arbitration but

once a place of arbitration has been chosen, it brings with it its own law. In

Rabobank (supra), it was submitted by appellants that the law governing the

dispute between the parties was the Indian law which applies to the

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agreement itself; since the arbitration agreement is silent on the law

governing the agreement to arbitrate and, therefore, in case where the

arbitration agreement is silent, it would ordinarily be the substantial law

governing the disputes between the parties. In such a situation where

arbitration clause is silent on the law governing the agreement to arbitration,

the Division Bench held that parties having chosen the juridical seat of

arbitration at London, have subjected themselves to English Law and the

Award in question could be challenged only before English Courts under the

English Arbitration Act, 1996 and not under Section 34 of the Indian

Arbitration and Conciliation Act, 1996.

26 In our case, arbitration Clause 15 expressly provides that the

arbitration shall be conducted according to the Commercial Arbitration

Rules of the American Arbitration Association and the place of arbitration

shall be New York and the Award shall be enforceable in accordance with

1958 Convention on the Recognition and Enforcement of Foreign Arbitral

Awards, as amended. Mr.Chinoy has correctly submitted that there has to be

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, the curial law is the law

which would be applicable to the arbitration proceedings and Clause 15

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makes it quite clear that the curial law which regulates the procedure to be

adopted in conducting the arbitration would be rules of American

Arbitration Association. There is no ambiguity that the American Arbitration

Association Rules read with Federal Arbitration Act, USA, would be the

curial law of the arbitration proceedings. I also find support for this view

from Harmony Innovation (supra), Union of India Vs. Reliance Industries

Limited (supra) and Eitzen Bulk A/S. Vs. Ashapura Minechem Ltd. & Anr.

(supra).

27 In Eitzen Bulk (supra), in paragraph 34, it is stated that as a matter of

fact the mere choosing of the juridical seat of Arbitration attracts the law

applicable to such location. In other words it would not be necessary to

specify which law would apply to the Arbitration proceedings since the law

of the particular country would apply ipso jure.

28 I cannot accept the submission of Mr.Singh for Petitioner that the seat

has not been fixed as New York and/or that New York is only a Venue of

arbitration. I would say that New York was the seat of arbitration under the

agreement and even Petitioner has proceeded on the basis that law

governing the arbitration/arbitration proceedings was the Federal Arbitration

Act. The present arbitration was seated in New York, USA and the Federal

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Association Act was ipso jure the law governing the arbitration/arbitration

proceedings. It should be noted that admittedly, the arbitration was

commenced by Petitioner in New York; the arbitration was seated in New

York, USA; the arbitration was conducted in accordance with the American

Arbitration Association Rules; Petitioner had in fact relied on the Federal

Arbitration Act to justify their joining of respondent nos.3 to 6 and also

indicated their intent to challenge the Appointment Provisions in the Courts

of New York; the Award was made in New York, the Federal Arbitration Act

contains provisions for challenging/vacating the Award made in USA and

the agreement itself provided that the award would be enforceable in

accordance with 1958 Convention on the Recognition and Enforcement of

Foreign Arbitral Awards as amended.

29 In Yograj Infrastructure Limited Vs. Ssang Yong Engineering and

Construction Company Limited 5, the arbitration clause and the governing

law clause were similar to the clause in our case. Arbitration law clause and

the curial law clause can be found in paragraphs 47 and 48 of the judgment

and the same read as under :

47 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

5 (2011) 9SCC 735

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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."

48 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."

30 The Apex Court came to conclusion that since the proceedings were

to be conducted in Singapore in accordance with the Singapore International

Arbitration Centre (SIAC) Rules, there was no ambiguity that the procedural

law with regard to the arbitration proceedings, is the SIAC Rules and the

Clause makes it very clear that the seat of arbitration would be Singapore.

The Apex Court also held that 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 SIAC Rules, it was no longer available to the appellant

to contend that the "proper law" of the agreement would apply to the

arbitration proceedings. It would be useful to reproduce paragraphs 49 to 59

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of the judgment which read as under :-

49 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 procedural law with regard to the arbitration proceedings, is the SIAC Rules. Clause 27.2 makes it clear that the seat of arbitration would be Singapore.

50 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?

51 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 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.

52 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 as the present arbitral proceedings, which are being conducted in Singapore, are concerned.

53 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.

54 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

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Rules as the Curial law, which included Rule 32, which categorically provides as follows :

"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."

55 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 at the time of signing of the Agreement.

56 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.

57 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.

58 In the instant case, once the parties had specifically agreed that the arbitration proceedings would be conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia 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.

59 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

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22 30.arbp.436.2016.doc

under Section 37 thereof.

31 Therefore, since the parties herein, agreed by virtue of Clause 15 of

the agreement that arbitration proceedings would be conducted in New York

in accordance with the rules of American Arbitration Association, it is no

longer available to Petitioner to contend that the proper law of the

agreement, i.e., Indian Law, would apply to the arbitration proceedings.

32 In the circumstances, I am of the clear view that the juridical seat of

arbitration as chosen by the parties was New York and the parties had

subjected themselves to the Federal Arbitration Act of USA. I am of the firm

view that the Award in question would be challenged by Petitioner only

under the provisions of Federal Arbitration Act, USA and not under Section

34 of the Arbitration and Conciliation Act, 1996.

Therefore, there is no need to go into the grounds of challenge to the

Award, which in any ways would have been argued only if I had held in

favour of Petitioner on this preliminary issue of jurisdiction.

33 The Arbitration Petition accordingly dismissed with costs in the sum

of Rs.5 lakhs. The costs to be paid within four weeks from today by way of

cheque drawn in favour of the Advocate on record for respondent no.1.

                                                   (K.R.SHRIRAM, J.)


Shraddha Talekar PS                                                                     22/22