Calcutta High Court
Medima Llc vs Balasore Alloys Limited on 3 August, 2021
ORDER SHEET
AP/267/2021
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
[Commercial Division]
MEDIMA LLC
VS
BALASORE ALLOYS LIMITED
BEFORE:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
Date : 3rd August, 2021.
[Via video conference]
Appearance:
Mr. S. N. Mookherji, Sr. Adv.
Mr. Shaunak Mitra, Adv.
Ms. Nandini Khaitan, Adv.
Ms. Shreya Singh, Adv.
Mr. Vishal Sinha, Adv.
... for the petitioner
Mr. Rishad Medora, Adv.
Mr. Meghajit Mukherjee, Adv.
Ms. Shivangi Thard, Adv.
... for the respondent
The Court :
1. The issue in the present application under section 9 of The
Arbitration and Conciliation Act, 1996, is whether the 'Governing Law'
clause contained in the agreement, for referring the disputes between
the petitioner and the respondent to arbitration before the
International Chamber of Commerce, excludes the operation of section
9 of the Act.
2. The applicant-petitioner was the claimant in the arbitration and
has emerged as the successful party in the Award dated 29th March,
2021 with an amount of USD 30,35,249.87 (equivalent to INR
22,08,75,133/-) in its favour. The Award is of the ICC passed in
proceedings governed by British law with the seat of arbitration in
London, UK. The petitioner - award holder - now seeks protective
orders to secure the dues payable by the respondent.
3. The adjudication on the point stated above arises from an
objection taken on behalf of the award-debtor to the maintainability of
the application. Counsel appearing for the parties agree that the issue
of maintainability should be decided first.
The case of the respondent - who resists the application under Section
9 of the 1996 Act.
4. The objection to the maintainability, as articulated by Mr.
Rishad Medora, learned counsel appearing for the award debtor (the
respondent before this court), Balasore Alloys, is that the parties
agreed that the substantive law, the curial law and the law governing
the arbitration agreement would be English law. Counsel places
Clause 23 of the underlying agreement to contend that the said clause
would clearly reflect the exclusion of section 9 of the Act, or Indian law
for that matter. Counsel submits that this clause, being the
arbitration agreement between the parties, falls within the exception
carved out in the proviso to section 2(2) of the Act which contemplates
that section 9 would apply to arbitrations that take place outside
India subject to its applicability not being excluded by agreement.
Counsel relies on the recommendation of the 246th Law Commission
Report for addition of the words "Provided that, subject to an express
agreement to the contrary, the provisions of section 9, 27, 37(1)(b) and
37(3) shall also apply to international commercial arbitrations...". The
argument is that the exclusion of the word 'express' from the
amendment of 2015 would show that the Legislature intended the
proviso to mean both express and implied exclusion. It is submitted
that any recourse taken by either of the parties in respect of the award
must necessarily be before the courts in England or before the ICC.
5. The second point urged is that section 9 does not entail grant of
interim reliefs post-award in a foreign arbitration. Counsel submits
that relief under section 9 can be given before, during or after the
arbitration in relation to domestic awards. It is submitted that the
proviso to section 2(2) cannot override the express language and effect
of section 9. Counsel relies on the basic principles of statutory
interpretation to contend that effect must be given to it regardless of
the consequences where the language is plain and that the court
cannot add to or make up any deficiencies in the legislation. Counsel
relies on Raffles Design International India Private Limited vs. Educomp
Professional Education Limited; 2016 SCC OnLine Del 5521 and on
Ashwani Minda vs. U-Shin Ltd.; 2020 SCC OnLine Del 1648, in support
of the proposition that Part I of the Act would be excluded where
parties have agreed to do so.
6. Mr. S.N. Mookherjee, learned senior counsel appearing for the
petitioner/award-holder, Medima, traces the legislative history of
Section 2(2) in which the proviso was introduced by the Amendment
Act of 2016. Counsel refers to Bhatia International vs Bulk Trading
S.A.; (2002) 4 SCC 105 which considered the applicability of Part I of
the Act in the context of International Commercial Arbitrations which
take place outside India. Counsel places the recommendations of the
Law Commission in its 246th Report dated 5th August, 2014 which
culminated in the introduction of the proviso to section 2(2). Counsel
relied on the Statement of Objects and Reasons to the Act of 1996 and
cites PASL Wind Solutions Private Limited vs. GE Power Conversion
India Private Limited; 2021 SCC OnLine SC 331, which held that
courts in India may pass interim orders in relation to assets located in
India in an arbitration which takes place outside India. Counsel also
relies on decisions of the Bombay and Delhi High Courts in Aircon
Beibars FZE vs. Heligo Charters Pvt. Ltd.; 2017 SCC OnLine Bom 631
and 2018 SCC OnLine Bom 1388 and Big Charter Private Limited vs.
Ezen Aviation Pty. Ltd.; 2020 SCC OnLine Del 1713 in support of the
aforesaid proposition. Decisions of the Supreme Court are placed to
urge that every attempt should be made to harmonize the provisions
of the statute in the case of a conflict.
7. I have heard learned counsel and considered the law relevant
for deciding the issue which falls for consideration in the present
application.
The Issue:-
Whether section 9 of The Arbitration and Conciliation Act, 1996
can be made applicable to a foreign award made under the Rules of
the International Chamber of Commerce in arbitration proceedings
governed by British Law with the seat of arbitration in London; and
Whether the arbitration agreement in the present case providing
for the substantive, curial as well as the law governing the
arbitration agreement to be governed by British law can be seen as
'an agreement to the contrary' under the proviso to section 2(2) of
the Act.
The Arbitration Agreement
8. Clause 23 of the Agreement dated 31st March, 2018 executed
between the parties is set out:
23. Governing Law; Disputes
"This Agreement shall be governed by and construed in accordance
with the laws for the United Kingdom. Any claim, controversy or
dispute arising out of or in connection with this Agreement or the
performance hereof, after thirty day calendar period to enable the
parties to resolve such dispute in good faith, shall be submitted to
arbitration conducted in the English language in the United Kingdom in
accordance with the Rules of Arbitration of the International Chamber
of Commerce by 3 (Three) arbitrators appointed in accordance with the
said Rules, to be conducted in the English language in London in
accordance with British Law. Judgment on the award may be entered
and enforced in any court having jurisdiction over the party against
whom enforcement is sought."
9. The provisions of the Act of 1996 which are relevant to the
issue, are:-
Section 2:
(2). "This part shall apply where the place of arbitration is in India.
Provided that subject to an agreement to the contrary, the
provisions of sections 9, 27 and clause (b) of sub-section (1) and
sub-section (3) of section 37 shall also apply to international
commercial arbitration, even if the place of arbitration is outside
India, and an arbitral award made or to be made in such place is
enforceable and recognised under the provisions of Part II of this
Act."
Section 9:
(1). "A party may, before or during arbitral proceedings or at any
time after the making of the arbitral award but before it is enforced
in accordance with Section 36, apply to a court ........."
Reading the above provisions together, the question is whether the
arbitration clause in the present case falls within the exception carved
out in the proviso to 2(2) and can be seen as "an agreement to the
contrary" which would take the arbitration agreement outside the
scope of the proviso to section 2(2) of the Act.
How the proviso to section 2(2) came to be part of the 1996 Act
10. Section 2(2) as it stood before the Amendment Act of 2016:
"2. (2) Scope- This part shall apply where the place of
arbitration is in India."
There was no proviso (underlined for emphasis). This means that
section 2(2) only contained the assertion that Part I of the Act would
apply to domestic arbitrations and nothing more. Insertion of the
proviso by the amendment of 2016 with effect from 23.10.2015
brought about a quantum shift in the effect of section 2(2) in respect
of the following:
a) international commercial arbitrations,
b) international commercial arbitrations including those outside
India, and
c) arbitral awards which are being made or are in the process of
being made in a place outside India which are capable of being
enforced and recognised under Part II of the Act.
11. The Law Commission in its 246th Report dated 5th August,
2014, recommended the introduction of a proviso to section 2(2) to
address certain specific problematic areas. The Law Commission
noticed several practical difficulties which could be faced by a
successful party in a foreign-seated arbitration in the matter of
obtaining temporary relief against the award-debtor where the assets
of the award-debtor are located in India. The possible remedies of
obtaining an interim order from a foreign court or filing a civil suit for
enforcing that interim order in India were found to be unworkable.
The Commission was of the view that the award-holder would be
placed at a distinct disadvantage in the event the award-debtor
dissipated its assets and rendered the award wholly infructuous. The
recommendatory Note reads as-
"This proviso ensures that the Indian Court can exercise jurisdiction
with respect to these provisions even where the seat of the
arbitration is outside India."
12. The insertion of the proviso to 2(2) found place in the
Amendment Bill of 2015 which culminated in the Amendment Act of
2016 - and the proviso as it stands today. The words 'only' and
'express' as recommended by the Law Commission, were dropped.
A. Decisions of the Supreme Court which had a bearing on the
246th Report of the Law Commission: -
Bhatia International vs Bulk Trading S.A. (2002) 4 SCC 105:-
The Supreme Court considered the applicability of Part I of the
Act to international commercial arbitrations which take place
outside India and held that the absence of the word 'only' from
2(2) - as it then existed- would not debar application of Part I to
international commercial arbitrations held outside India unless
the parties agreed to exclude such applicability. The option to
contract out of the application of Part I was not available to
parties in respect of domestic arbitrations under Part I of the
Act.
Bharat Aluminium Company vs Kaiser Aluminium Technical
Services Inc. (2012) 9 SCC 552:
A 5-Judge Bench of the Supreme Court overruled Bhatia and
held that section 9 could not be made applicable to arbitrations
which take place outside India but declared that the law laid
down in BALCO would apply prospectively to arbitration
agreements executed before 6th September, 2012, being the
date when the judgment in BALCO was delivered - paragraph
197 of the Report.
[The Law Commission referred to the anomalous situations
which may arise from paragraph 197 of BALCO where courts
could grant interim orders in respect of foreign-seated
arbitrations despite BALCO holding otherwise].
B. Other enactments supporting intervention by the Indian Courts
in foreign-seated arbitrations
i) The Statement of Objects and Reasons of The Arbitration and
Conciliation (Amendment) Bill, 2015, recognised that the Act
was based on the UNCITRAL Model Law on International
Commercial Arbitration, as adopted in 1985 by the United
Nations Commission on International Trade Law and applied to
both international as well as domestic arbitrations for
facilitating alternative dispute mechanisms. The Statement in
clause 6 specifically provides :-
" 6. ............
(i) to amend the definition of "Court" to provide that in the
case of international commercial arbitrations, the Court should
be the High Court;
(ii) to ensure that an Indian Court can exercise jurisdiction
to grant interim measures, etc., even where the seat of
arbitration is outside India.
.............."
ii) The Notes on Clauses to the Amendment Bill in respect of section
2 provides that:-
" ...A proviso below sub-section (2) is inserted to provide
that some of the provisions of Part I of the Act shall also
apply to International Commercial Arbitration, even if the
place of arbitration is outside India."
iii) Article 17 J -of the UNCITRAL Model Law on International
Commercial Arbitrations - with amendments as adopted in
2006- states that:-
"Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure
in relation to arbitration proceedings, irrespective of whether
their place is in the territory of this State, as it has in relation to
proceedings in courts. The court shall exercise such power in
accordance with its own procedures in consideration of the
specific features of international arbitration."
iv) Article 28.2 of the Arbitration Rules of the International
Chamber Of Commerce (ICC) - in force from 1 March 2017
states that:
"Article 28: Conservatory and Interim Measures
1) ..........
2) Before the file is transmitted to the arbitral tribunal, and in appropriate
circumstances even thereafter, the parties may apply to any competent judicial
authority for interim or conservatory measures. The application of a party to a
judicial authority for such measures or for the implementation of any such
measures ordered by an arbitral tribunal shall not be deemed to be an
infringement or a waiver of the arbitration agreement and shall not affect the
relevant powers reserved to the arbitral tribunal. Any such application and
any measures taken by the judicial authority must be notified without delay to
the Secretariat. The Secretariat shall inform the arbitral tribunal thereof".
C. Decisions which support intervention of courts in India for interim
relief in respect of a foreign award
In PASL Wind Solutions vs GE Power Conversion India 2021 SCC
OnLine SC 331; the question before the Supreme Court was
whether two Indian companies can choose a forum outside India
for arbitration and whether an award made at such forum to
which the New York Convention applies, can be said to be a
'foreign award' under Part II of the Act and be enforceable as
such. The Supreme Court construed the proviso to section 2(2) to
be relevant for interim orders in a foreign-seated arbitration where
the assets are located in India.
Aircon Beibars FZE v. Heligo Charters Pvt. Ltd. 2017 SCC OnLine
Bom 631 and Heligo Charters Pvt. Ltd. v Aircon Feibars FZE 2018
SCC OnLine Bom 1388, Single and Division Bench decisions of the
Bombay High Court, respectively, where the order of the First
Court was upheld by the Division Bench by holding that section 9
cannot be excluded in the absence of a specific agreement to the
contrary and further that the respondent Aircon Beibars cannot
be denied interim protection regardless of whether the award was
put to execution or not. The Single Bench decision noted that the
contract in that case was to be governed in accordance with
Singapore law and be referred to arbitration in Singapore under
the SIAC Rules.
Big Charter Pvt. Ltd. vs Ezen Aviation Pty. Ltd; 2020 Scc Online Del
1713, also involved a Singapore-seated arbitration under the SIAC
Rules and the agreement was to be governed in accordance with
the laws of Singapore. A Single Bench of the Delhi High Court
recognised the need to obtain interim relief under section 9
against dissipation of assets located in India.
In Raffles Design International v Educomp Professional Education
2016 SCC Online Del 5521; the Delhi High Court held that Rule
26.3 of the SIAC Rules was in conformity with the UNCITRAL
Model Law and permitted the parties to approach the court for
interim relief and the court to grant such relief.
D. The other view :
Ashwani Minda vs. U-Shin Ltd.; 2020 SCC OnLine Del 1648;
The governing law of the Agreement in this case was to be the
laws of Singapore and the dispute was to be resolved by
arbitration in Singapore in accordance with the Arbitration Rules
of the Singapore International Arbitration Centre (SIAC) Rules.
The Court construed the Arbitration Agreement as an expression
of the intention of the parties to exclude the applicability of Part I
of the Act.
This decision can however be factually distinguished from the
present case since the application under Section 9 was filed after
the same interim reliefs were rejected by an Emergency Arbitrator
under the Japan Commercial Arbitration Association (JCAA)
Rules. In the appeal from this decision reported in Ashwani
Minda vs. U-Shin Ltd.; 2020 SCC OnLine Del 721, the conduct of
the appellant, Ashwani Minda in electing to invoke the JCAA
process and filing a Section 9 application after having failed to
obtain interim relief in the former proceeding was taken note of.
The Division Bench further observed that the question of
exclusion of applicability of Part I would be decided in an
appropriate case.
'Agreement to the contrary' under the proviso to section 2(2) of the Act:
13. The caveat to the application of section 9 to international
commercial arbitrations with a place outside India and an arbitral
award made in such place is 'an agreement to the contrary'. This
means that the contracting parties must evince and articulate an
intention not to subject the arbitration agreement to the application of
section 9 of the Act. The application of section 9 to an arbitration
agreement and an award which is under Part II of the Act is a fallout
of the Supreme Court decision in Bhatia which was prospectively
overruled in BALCO only to be reinstated by the recommendations of
the Law Commission in August 2014 thereafter culminating in the
insertion of the proviso to 2(2) with effect from 23rd October, 2015.
14. The 1996 Act asserts party autonomy at all levels. A party's
control over the proceedings is evident from plain affirmation- "The
parties are free to determine.." or "..agree" (sections 10, 11, 13, 20,
22)- to creating exceptions in the form of "Unless otherwise agreed by
the parties" (sections 21, 24, 25, 26, 29, 31, 33). It is clear however
that the parties must articulate an intention to do - or not to do- that
which follows in the particular provision. A good example would be
section 31(3)(a) where the obvious requirement of an award containing
reasons can only be circumvented if the parties agree otherwise. The
important aspect is that none of these provisions contain words such
as 'express' or "only" etc. to lend weight to the plain meaning of the
provision.
15. The argument that the deletion of the word 'express' in relation
to 'agreement to the contrary', as recommended by the Law
Commission to the proviso to 2(2) would indicate that an implied
agreement is included in the proviso has to be seen through the same
prism as the other sections of the Act which contemplate an
agreement by the parties. In other words, dropping the word 'express'
in the final cut means little; the structure of the proviso as it exists
today is that there must be a clear, unequivocal and unambiguous
articulation by the parties to exclude the application of section 9 from
the arbitration which is to take place outside India. Simply put, there
must be something more to an arbitration agreement governed by a
foreign law and with a foreign seat; the agreement must indicate in
clear and express terms that the parties intend to exclude the
operation of section 9 from the purview of the said arbitration
agreement (underlined for emphasis). Hence, an arbitration agreement
which merely chooses the law governing the underlying agreement,
the arbitration and the conduct thereof without anything more cannot
be seen as excluding the application of Section 9 by implication and
closing the gates to Section 9 or the scope of the proviso to 2(2) of the
Act.
16. The import of the proviso to section 2(2) can be better
understood if each part thereof is placed in the larger framework of
the Act. Sub-section (2) of 2 makes Part I of the Act applicable where
the "place" of arbitration is in India. The exception to this brought in
by the proviso repeats the word "place of arbitration" in the proviso.
The word "place" finds mention in Section 20 of the Act which gives
free-reign to the parties to agree on the place where the arbitration
shall be conducted and in Sections 28 and 31 of the Act which further
roots the arbitration to a place and the laws of that place while
Section 31 confers a place-identity to the arbitral award. The term
"seat" on the other hand, despite being the more popular choice, does
not find mention in respect of foreign arbitrations. The proposal of the
Law Commission in its 246th Report to amend several sections of the
Act to replace "place" with "seat" was not given effect to. The Supreme
Court in BALCO referred to "place" as being equivalent to the juridical
seat of arbitration which was referred to by the Supreme Court in
Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd.;
(2017) 7 SCC 678. In this decision, the Supreme Court referred to the
inter-changeability of "place" and "seat" with reference to Section 2(2)
of the Act. BGS SGS Soma JV vs. NHPC Limited; (2020) 4 SCC 234 may
also be referred to in this context.
17. Second, the exception contained in the proviso to applicability of
Part I has been used with reference to "International Commercial
Arbitration" which has been defined in Section 2(1)(f). The definition
consists of disjunctive conditions, namely arbitrations relating to
disputes arising out of legal relationships where at least one of the
parties is an individual who is a habitual resident of a foreign country,
a body corporate which is incorporated outside India, an association
whose central control is exercised in a country outside India or the
Government of a foreign country. In PASL Wind Solutions Pvt. Ltd. vs.
GE Power Conversion India Pvt. Ltd; (2021) SCC Online SC 331, the
Supreme Court held that the expression "International Commercial
Arbitration" under Section 2(1)(f) was party-centric whereas the same
expression used in the proviso to Section 2(2) was place-centric. The
Supreme Court thus held that the expression International Commercial
Arbitration as used in the proviso to Section 2(2) refers to a foreign-
seated arbitration to which Part II of the Act applies and not in the
sense defined in Section 2(1)(f). The undeniable reference to a foreign-
seated arbitration and the resulting award would further be evident
from the reference to "..........and an arbitral award made or to be made
in such place is enforceable and recognised under the provisions of Part
II of this Act". The expression International Commercial Arbitration used
in the proviso would therefore necessarily mean a foreign-seated
arbitration which forms the substratum of Part II of the 1996 Act. The
conclusion from the above is that the proviso to 2(2) would cover
arbitration agreements regardless of whether 'seat' is used or
'International Commercial Arbitration' is not used. (underlined for
emphasis).
18. The other point of objection taken by the award-debtor pertains
to non-availability of the remedy under Section 9 in a post-award
scenario in relation to a foreign award which is enforceable under Part
II of the Act.
Is this argument legally tenable?
For the above, the respondent relies on the language of Section
9, the relevant part of which is set out below:
"9. Interim Measures, etc, by Court.- (1) A party may, before
or during arbitral proceedings or at any time after the making
of the arbitral award but before it is enforced in accordance
with Section 36, apply to a court ................"
19. The language "..........and an arbitral award made or to be
made........" in section 2(2) read with the proviso makes it clear that
Section 9 would apply in a post-award scenario subject to the other
conditions of the proviso being satisfied. Second, the perceived gap
between Section 9 so far as it mentions enforcement under Section 36
and the enforceability − recognition under Part II would defeat the
very purpose of introduction of the proviso to Section 2(2) if allowed to
magnify into a conflict. There is every chance that an award-holder of
an arbitration which took place outside India would be rendered
remediless if prompt and effective interim measures are not granted to
the award-holder in the interregnum in relation to the assets of the
award-debtor which are located in India. In other words, if suitable
interim measures are not granted to a foreign award-holder and the
award is made to pass the tests for enforcement under Part II, the
award-holder may be denuded of its rights. The Act, together with the
amendments, intends to facilitate quick resolution of disputes through
alternative means. Hence, asking an award-holder to wait until the
award is recognised and enforced is antithetical to the very objective of
the Act. The Law Commission in its 246th Report noticed the aforesaid
as also the lack of an efficacious remedy in furtherance of the award.
20. It may hence be said, and with good reason, that section 9 read
with the proviso to Section 2(2) would require a purposive
construction which would be in line with the intention of the framers
for bringing in the proviso by the Amendment Act of 2016. The
objective of the amendment was to make the proviso workable, not
stultify it by reason of a conflict with Section 9.
21. This court therefore finds substance in the contention that every
attempt should be made to harmonise the provisions of a statute
wherever there appears to be a conflict. In J.K. Cotton Spinning and
Weaving Mills Co. Ltd. vs. State of Uttar Pradesh; AIR 1961 SC 1170, a
3-Judge Bench of the Supreme Court spoke for the Rule of
harmonious construction and the presumption that every part of the
statute should be given effect to and that no clause should be reduced
to a dead letter. In High Court of Gujarat vs. Gujarat Kishan Mazdoor
Panchayat; (2003) 4 SCC 712, the Supreme Court explained that while
the court is not entitled to re-write the statute itself, it is not debarred
from "ironing out the creases". Reference may also be made to The King
vs. Dominion Engineering; AIR 1947 PC 94 which held that in the event
of a conflict, the later provision would prevail since it expresses the
last intention of a legislature. The last intention of the legislature in
the present case would be the proviso to Section 2(2) for ascertaining
the true scope and meaning of Section 9 and the power of the court to
make interim measures in a foreign seated arbitration post-award.
22. The Arbitration in the present case is to be conducted in
accordance with the Rules of Arbitration of the International Chamber
of Commerce. Article 28.2 of the ICC Arbitration Rules, 2017 permits
the parties to apply to a competent judicial authority for interim
measures. It is relevant to state that the Supreme Court in Bhatia
referred to Article 23.2 of the ICC Rules which were then in force and
held that Section 9 would be applicable to International Commercial
Arbitrations which take place outside India. Article 17 J of the
UNCITRAL Model Law also green-flags the right to approach courts
outside the territory of the State. Significantly, the arbitration
agreement in the present case permits enforcement of the award in
any court having jurisdiction over the party against whom
enforcement is sought.
23. Based on the above discussion, this court is of the view that the
present application for interim protection under Section 9 of the Act,
in respect of the Award of the London-seated arbitration, is
maintainable and the petitioner Medima is hence entitled to seek
interim measures against Balasore, the respondent award-debtor.
24. Upon hearing learned counsel on behalf of the petitioner, the
leave under Clause 12 of the Letters Patent, 1865, is granted.
25. Matter to appear on 11th August, 2021.
(MOUSHUMI BHATTACHARYA, J.)
RS
