Aastha Broadcasting Network ... vs Thaicom Public Company Ltd
2011 Latest Caselaw 3694 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+                     Date of Decision: 03.08.2011


%             O.M.P. 528/2011 & I.A. No. 11308/2011


       AASTHA BROADCASTING NETWORK LIMITED     .....Petitioner
                    Through:  Mr.   Sudhir   Nandrajog,      Senior
                              Advocate, with Mr. Vivek Chib &
                              Mr.Joby P. Verghese, Advocates.

                      versus


       THAICOM PUBLIC COMPANY LTD               .....Respondent
                      Through: Mr. Sanjay Jain, Senior Advocate,
                               with Ms. Ruchi Jain, Mr. Nikhil
                               Nayyar & Mr. Arun Himatlal Mehta,
                               Advocates.


CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI


       1. Whether the Reporters of local papers may
          be allowed to see the judgment?           :       No

       2. To be referred to Reporter or not?          :     Yes

       3. Whether the judgment should be reported
          in the Digest?                              :     Yes

VIPIN SANGHI, J. (Oral)

1. I have heard learned senior counsels for the parties on the issue

as to whether or not the present petition under Section 34 of the

Arbitration & Conciliation Act, 1996 (the Act) is maintainable before

this court to assail the arbitral award dated 03.04.2011 passed by the

Arbitral Tribunal consisting of three learned Judges in an international

commercial arbitration.

2. The submission of the respondent is that the arbitration in

question is an International Commercial Arbitration and the application

of Part-I of the Act (which contains Section 34 of the Act) stands

excluded in the present case. For this purpose, the respondent relies

upon Clauses 13 & 14 of the agreement dated 29.05.2000, which read

as follows:

"13. GOVERNING LAW This Agreement, and the rights and responsibilities of the parties hereunder, and any dispute, controversy or claim arising out of or in relation to this Agreement, or the breach, termination or invalidity thereof, shall be subject to and construed in accordance with the laws of the Republic of Singapore. Customer hereby agrees that this Agreement is entered into for commercial purposes and hereby waives for itself and for its assets any claim of immunity to which it is or may be entitled in respect of, from any suit or proceeding brought in respect of this Agreement.

The expression "customer" in the aforesaid clause has been used

in relation to the petitioner herein.

14. ARBITRATION Any dispute arising from the interpretation or from any matter relating to the performance of this Agreement or relating to any right or obligation herein contained which cannot be resolved by the parties shall be referred to and finally resolved by arbitration under the rules of the United Nations Commission on International Trade Law

("UNCITRAL"). The arbitration shall be held in Singapore and shall be in the English language. The arbitrator‟s determination shall be final and binding between the parties and the parties waive all rights of appeal or objection in any jurisdiction. The costs of the Arbitration shall be shared by the parties equally."

3. The respondent's submission is that the governing law applicable

to "this agreement" and to the rights & responsibilities of the parties

under the agreement, and to any dispute, controversy or claim arising

out of or in relation to the agreement, or the breach, termination or

invalidity thereof is the law of the Republic of Singapore. It is,

therefore, argued that the substantive law applicable to the agreement

is the law of Singapore. Clause 14 is the arbitration agreement

between the parties which provides that the disputes arising out of the

agreement shall be finally resolved by arbitration under the Rules of

UNCITRAL and the arbitration shall be held in Singapore.

4. In support of his submission Mr. Jain, learned senior counsel for

the respondent, has placed reliance on a Division Bench judgement of

this court in Max India Limited Vs. General Binding Corporation,

2009 (3) Arb. L.R. 162 (Delhi) (DB) and on a Supreme Court decision in

Videocon Industries Limited Vs. Union of India & Another, 2011

(5) Scale 678.

5. On the other hand the submission of Mr. Nandrajog, learned

senior counsel for the petitioner, is that the parties have neither

expressly, nor impliedly, excluded the application of part-I of the Act.

He submits that the respondent had also understood the agreement

between the parties to mean that Part-I of the Act is not excluded, and

this is evident from the fact that the respondent had approached the

Chief Justice of India for filling the vacancy created upon the

resignation of the petitioner's nominated Arbitrator under Section

11(6) of the Act by filing Arbitration Petition No.6 of 2010 titled

"Thaicom Public Co. Ltd. v. M/s. Aastha Broadcasting Network Ltd.".

This petition was allowed by Hon'ble Mr. Justice Dalveer Bhandari on

06.08.2010. The review petition preferred by the petitioner was also

dismissed by his Lordship on 19.07.2011.

6. In support of his submissions Mr. Nandrajog has placed reliance

upon Citation Infowares Limited Vs Equinox Corporation, (2009)

7 SCC 220; Venture Global Engineering Ltd. Vs. Satyam

Computer Services Ltd., (2008) 4 SCC 190; Indtel Technical

Services Private Limited Vs. W.S. Atkins Rail Limited, (2008) 10

SCC 308; National Thermal Power Corporation Vs. Singer

Company & Others, (1992) 3 SCC 551. And; Sumitomo Heavy

Industries Ltd. Vs. ONGC Ltd., AIR 1998 SC 825.

7. In Max India (supra), the Division Bench took note of the

Supreme Court judgment in Singer Company (supra). The principles

that the Division Bench, inter alia, culled out from the said judgment

read as follows:-

       "a)    .........

       b)     .........

       c)     .........

       d)     .........

e) Proper law of arbitration agreement is normally the same as the proper law of contract. It is only in exceptional cases that it is not so even where the proper law of contract is expressly chosen by the parties. Normal presumption is that the law of a country where the arbitration is agreed to be held is the proper law of arbitration agreement, though it is rebuttable presumption.

f) Importantly, the validity, effect and interpretation of the arbitration agreement are governed by its proper law.

g) The parties have the freedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing arbitration as well as the procedural law governing the conduct of the arbitration.

h) Where the proper law of contract is expressly chosen by the parties such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral and ancillary to the main contract, is nevertheless part of such contract.

i) The arbitration proceedings are to be conducted in accordance with the law of the country in which the arbitration is held unless the parties have specifically chosen the law governing the conduct and procedure of arbitration. Normally, the appropriate courts of the seat of arbitration will have jurisdiction in respect of procedural matters concerning the conduct of arbitration.

j) The overriding principle is that the courts of the country whose substantive laws govern the arbitration agreement are the competent courts in respect of all matters arising under the arbitration agreement and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to matters of procedure. All the matters in respect of arbitration agreement fall within the conclusive competence of the courts of the country whose laws govern the arbitration agreement. The concept of party autonomy in international contracts is restricted by all systems of law so far as it is not compatible with the proper law of the contract or the mandatory procedural rules of the place where the arbitration is agreed to be conducted or any overriding public policy.

k) The award rendered in the territory of a foreign State may be regarded as a domestic award in India where it is sought to be enforced by reason of Indian law being the proper law governing the arbitration agreement in terms of which the award was made.

l) .... .... .... ..........."

8. The Division Bench rejected the reliance placed by the appellant

on Bhatia International Vs. Bulk Trading S.A & Anr., (2002) 4 SCC

105 (in para 35 of the decision) by relying upon para 32 of the said

decision which, inter alia, records:

"32. ...... ...... ..... In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply."

9. There is one distinction between the clauses of the agreement in

the present case, and that considered by the Division Bench in Max

India (supra). While in Max India (supra), the agreement specifically

vested jurisdiction in the Courts at Singapore, the agreement in the

present case is silent in this regard. However, this to my mind makes

no difference in the facts of this case. As noted by the Division Bench

in Max India (supra), the Singapore Arbitration Act, 2001 gives

jurisdiction to the Courts of Singapore to pass orders granting interim

measures to the parties as the place of arbitration is in Singapore.

Therefore, even if the agreement in Max India (supra) had been

silent, and had not specifically provided that the Courts at Singapore

would have jurisdiction, that would have made no difference to the

decision of the Court, as that statement was nothing more than an

expression of the legal consequence which would flow from the facts

that: the substantive law applicable to the contract was the law of

Singapore; there was nothing to rebut the presumption that the parties

had agreed that the proper law of arbitration would be the law of

Singapore, or to demonstrate the intention of the parties that the

proper law of the contract would be the Indian law, and; the arbitration

had been agreed to be held in Singapore under the Rules of SIAC.

10. In Videocon Industries (supra), Article 33.1 of the agreement

in question provided that, subject to the provisions of Article 34.12, the

contract shall be governed and interpreted in accordance with the laws

in India. Article 34.12 provided that the venue of arbitration

proceedings shall be Kuala Lumpur, Malaysia. It was also provided that,

notwithstanding the provisions of Article 33.1, the arbitration

agreement contained in Article 34 shall be governed by the laws of

England. Therefore, though the substantive law applicable to the

contract was the Indian law, the law of arbitration had been agreed

between the parties to be the law of England.

11. The Supreme Court considered the decision in Bhatia

International (supra) and also considered the judgment of the

learned single Judge of the Gujarat High Court in Hardy Oil and Gas

Ltd. vs. Hindustan Oil Exploration Co. Ltd & Ors, 2006 (1) GLR

658.

12. In Hardy Oil (supra), the agreement provided that the said

agreement shall be governed by, and construed in accordance with the

substantive laws in India. Disputes were to be resolved through

arbitration under the rules of the London Court of International

Arbitration. The place of arbitration had been agreed as London and

the law governing arbitration was agreed to be the England law. The

learned single Judge, after referring to Bhatia International (supra),

upheld the order of the learned District Judge whereby he held that the

Civil Court had no jurisdiction to entertain a petition under Section 9 of

the Act, as the provisions of the Act could not be invoked to question

the arbitration proceedings, or the award. The Supreme Court in

paragraph 18 of its decision approved the decision of the Gujarat High

Court in Hardy Oil (supra), on the basis that the parties had agreed

that the law governing the arbitration will be the English law. This

necessarily implied that the parties had desired to exclude the

provisions of Part I of the Act.

13. Consequently, in Videocon Industries (supra), it was held that

the High Court of Delhi did not have jurisdiction to entertain the

petition under Section 9 of the Act, and the mere fact that the

appellant had earlier filed a similar petition was not sufficient to clothe

that High Court with the jurisdiction to entertain the petition filed by

the respondents.

14. Therefore, even where the substantive law applicable to the

contract was agreed to be the Indian Law, the Court held that the Law

of Arbitration need not necessarily be the Indian Law, and the parties

had the right to prescribe a separate system of law for application to

the arbitration agreement.

15. I may now deal with the decisions of the Supreme Court in

Bhatia International (supra), Indtel Technical Services Private

Limited (supra) of Hon'ble Mr. Justice Altamas Kabir, and Citation

Infowares Limited (supra) of Hon'ble Mr. Justice V.S. Sirpurkar. The

latter two decisions have been rendered by the Hon'ble Judges acting

as the designate of the Chief Justice of India while dealing with

applications under Section 11(5) of the Arbitration & Conciliation Act,

1996.

16. In my view, the decision in Bhatia International (supra) does

not advance the case of the petitioner. In that judgment, the Supreme

Court held that in cases of international commercial arbitration held

out of India, provisions of Part-I would apply, unless the parties by

agreement express or implied, exclude all or any of its provisions. If

Part-I of the Act is excluded, the laws or rules chosen by the parties

would prevail. Any provision in Part-I, which is contrary to or is

excluded by that law or rules would not apply. Bhatia International

(supra) did not hold that in respect of all international commercial

arbitrations held out of India, the provisions of Part-I would

peremptorily apply. If the agreement of the parties expressly or

impliedly excludes the application of Part-I, or any of its provisions,

Part-I or the excluded provisions would not apply. In the facts before

the Supreme Court in Bhatia International (supra), the Supreme

Court found, as a matter of fact, that the provisions of Part-I of the Act

had not been excluded by the parties, either expressly or impliedly

and, therefore, it was held that Section 9 of the Act could be invoked

by the parties before the Indian Courts.

17. The issue arising for consideration before me is whether it can be

said (in the light of the aforesaid clauses of the agreement contained in

Clauses 13 & 14), that the parties have excluded the application of

Part-I of the Act, either expressly or impliedly. Obviously, there can be

no quarrel with the legal proposition laid down by the Supreme Court

in Bhatia International (supra). But it needs to be examined in the

facts of each case, whether or not Part-I, or any of its provisions, have

either expressly or impliedly been excluded by agreement of parties.

The issue is whether the test laid down by the Supreme Court in

Bhatia International (supra) is satisfied, one way or another, in the

facts of this case.

18. In Indtel Technical Services Private Limited (supra), the

Court in paragraphs 36 and 37 of its decision, inter alia, observed as

follows:

"36. It is no doubt true that it is fairly well-settled that when an arbitration agreement is silent as to the law and procedure to be followed in implementing the arbitration agreement, the law governing the said agreement would ordinarily be the same as the law governing the contract itself. The decisions cited by Mr. Tripathy and the views of the jurists referred to in the National Thermal Power Corporation case (supra) support such a proposition. What, however, distinguishes the various decisions and views of the authorities in this case is the fact that in the Bhatia International case (supra) this court laid down the proposition that notwithstanding the provisions of Section 2(2) of the Arbitration and Conciliation Act, 1996, indicating that Part-I of the said Act would apply where the place of arbitration is in India, even in respect of International Commercial agreements, which are to be

governed by laws of another country, the parties would be entitled to invoke the provisions of Part-I of the aforesaid Act and consequently the application made under Section 11 thereof would be maintainable.

37. The decision in Bhatia International case has been rendered by a Bench of three Judges and governs the scope of the application under consideration, as it clearly lays down that the provisions of Part I of the Arbitration and Conciliation Act, 1996, would be equally applicable to international commercial arbitrations held outside India, unless any of the said provisions are excluded by agreement between the parties expressly or by implication, which is not so in the instant case."

19. From the aforesaid extract, it is clear that the Court while

deciding Indtel Technical Services Private Limited (supra) did not

doubt the correctness of the view of the Supreme Court in NTPC Vs.

Singer Company (supra). Rather the said view was taken as the

settled view. However, the Supreme Court proceeded on the basis of

its later decision in Bhatia International (supra).

20. The Court does not say that there is, and, as a matter of fact

there is no conflict between the decisions in NTPC Vs. Singer

Company (supra) and Bhatia International (supra). They deal with

different aspects. To determine whether or not the test laid down by

Bhatia International (supra) (in respect of an International

Commercial Arbitration where the place of arbitration is not in India) is

satisfied, i.e., whether Part-I or any of its provisions of the Act stand

expressly or impliedly excluded, NTPC Vs. Singer Company (supra)

becomes relevant.

21. From the aforesaid extract, it appears that while paraphrasing

the ratio of the decision of the Supreme Court in Bhatia International

(supra), in para 36, the Court missed out the crucial words of the

judgment in Bhatia International (supra) found in para 32 of that

decision. The relevant extract from para 32 of Bhatia International

(supra) reads as follows:

"32. ...... ...... ..... In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply." (emphasis supplied)

22. The issue as to whether or not there was an express or implied

exclusion of the application of Part-I, or any of the provisions of the

Act, though determined by the Court in Indtel Technical Services

Private Limited (supra) in para 37, the said determination appears to

be without any discussion or reasons. With the utmost respect, to me,

it appears that for the aforesaid reason, the decision in Indtel

Technical Services Private Limited (supra) does not constitute a

binding precedent. NTPC Vs. Singer Company (supra) and Bhatia

International (supra), being decisions of larger benches, I am inclined

to follow those decisions.

23. The decision in Citation Infowares Limited (supra) can be

distinguished from the facts of the present case, as in Citation

Infowares Limited (supra), according to the Court, the place of

arbitration had not been specifically agreed to and that was a relevant

consideration. In contradistinction, in the present case, the place of

arbitration has been agreed to as Singapore. The Court while deciding

Citation Infowares Limited (supra) heavily places reliance on the

decision in Indtel Technical Services Private Limited (supra). As I

have already held that Indtel Technical Services Private Limited

(supra) does not advance the case of the petitioner, in my view, the

decision in Citation Infowares Limited (supra) also does not come to

the aid of the petitioner. I do not consider it necessary to elaborately

deal with the judgment in Venture Global (supra), as that judgment

essentially follows the decision in Bhatia International (supra).

24. The petitioner has also placed reliance on Sumitomo Heavy

Industries Ltd. (supra) (a 3-Judge Bench decision). This decision, in

fact, supports the case of the respondent and not the petitioner.

Clause 17 of the agreement in that case read as follows:

"17.0 Laws/Arbitration

17.1 Applicable Laws

All questions, disputes or difference arising under, out of or in connection with this Contract shall be subject to the laws of India.

17.2 Arbitration If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representatives or

assigns in respect of the construction of these presents or concerning anything herein contained or arising out of these presents or as to the rights, liabilities or duties of the said parties hereunder which cannot be mutually resolved by the parties, the same shall be referred to arbitration, the proceedings of which shall be held at London, U.K. Within 30 days of the receipt of the notice of intention of appointing arbitrators each party shall appoint an arbitrator of its own choice and inform the other party. Before entering upon the arbitration, the two arbitrators shall appoint an umpire. In case the parties fail to appoint its arbitrator within 30 days from the receipt of a notice from the other party in this behalf of if any dispute in selection of umpire, the president of International Chamber of Commerce, Paris, shall appoint the arbitrator and/or or the umpire as the case may be.

The decision of the arbitrators and failing to an agreed decision by them, the decision of the umpire shall be find and binding on the parties.

The arbitration proceeding shall be held in accordance with the provision of International Chamber of Commerce and the rules made thereunder as amended from time to time. The arbitration proceedings shall be conducted in English language."

25. After noticing the fact that in an international commercial

arbitration there could be three different systems of law operating

simultaneously, namely, (i) the proper law of contract, i.e., the law

which governs the contract; its interpretation and the substantive

rights of the parties in respect of which the disputes has arisen; (ii) the

proper law of arbitration agreement, i.e., the law governing the

application of the parties to submit their dispute to arbitration; and to

honour the award of the tribunal, and, (iii) the curial law, i.e., the law

governing the conduct of individual reference, the Supreme Court in

Paragraph 16 held as follows:

"The law which would apply to the filing of the award, to its enforcement and to its setting aside would be the law governing the agreement to arbitrate and the performance of that agreement. Having regard to the clear terms of Clause 17 of the contract between the appellant and the first respondent, we are in no doubt that the law governing the contract and the law governing the rights and obligations of the parties arising from their agreement to arbitrate, and, in particular, their obligations to submit disputes to arbitration and to honour the award, are governed by the law of India; nor is there any dispute in this behalf." (emphasis supplied)

26. Therefore, the Supreme Court held on a reading of the aforesaid

Clause 17 that since the substantive law of contract was the Indian law

the proper law of arbitration would be the Indian law even though the

proceedings had been agreed to be held at London, U.K. in accordance

with the provisions of the ICC. The language of Clauses 13 & 14 in the

present case is para materia with the clauses considered by the

Supreme Court in Sumitomo Heavy Industries Ltd. (supra).

27. I may also refer to my own decision in Resolution India Ltd.

Vs. One Chrome LLC & Others, O.M.P. No. 280/2011 decided on

02.08.2011, wherein I considered an agreement with similar clauses

and concluded that the applicability of Part-I of the Act stood excluded.

In that decision, I have noticed another decision of the Supreme Court

(of Hon'ble Mr. Justice V.S. Sirpurkar) in the case of M/s Dozco India

P. Ltd V. M/s Doosan Infracore Co.Ltd, Arb.P.No.5/2008 decided on

08.10.2010, whereby he rejected a petition preferred under Section

11(6) of the Act.

28. In that case, Articles 22 and 23 of the contract read as follows:-

"Article 22. Governing Laws - 22.1: This agreement shall be governed by and construed in accordance with the laws of The Republic of Korea.

Article 23. Arbitration - 23.1: All disputes arising in connection with this Agreement shall be finally settled by arbitration in Seoul, Korea (or such other place as the parties may agree in writing), pursuant to the rules of agreement then in force of the International Chamber of Commerce"

29. On the basis of the aforesaid clauses, the submission of the

respondent was that the Courts in India did not have jurisdiction as the

parties had excluded the application of Part I of the Act. The Court

considered various decisions, including the decision in Bhatia

International (supra) and concluded that the language of Articles 22

and 23 of the agreement between the parties spelled out a clear

agreement between them to exclude Part I of the Act. It was held that

Bhatia International (supra) and the other decisions relied upon by

the petitioner were not applicable to the case. It was also held that

Article 23.1 suggests that the law governing the arbitration will be the

Korean Law and the seat of arbitration will be Seoul in Korea.

Consequently the petition was dismissed by the Supreme Court.

30. The submission that the respondent had earlier preferred a

petition under Section 11 of the Arbitration & Conciliation Act, 1996

before the Chief Justice of India, being Arbitration Petition No. 6/2010

titled „Thaicom Public Co. Ltd. Vs. Astha Broadcasting Network Ltd.‟,

which was entertained and allowed by the Supreme Court of India and

the petitioner's application for review was also rejected on 19.07.2011

does not advance the case of the petitioner either. A perusal of the

order dated 06.08.2010 passed in Arbitration Petition No. 6/2010

shows that the issue with regard to the applicability of Part-I of the Act

was not gone into by the Hon'ble Supreme Court while deciding the

said petition. In fact, even at the stage of review this issue was not

raised by the petitioner herein. The review petition was dismissed on

account of inordinate delay of 262 days and also on merits. The

Supreme Court in Videocon Industries (supra) dealt with the similar

submission and rejected the same.

31. In Singer Company (supra), the Supreme Court has held that

the proper law of arbitration is normally the same as the proper law of

contract. Normal presumption is that the law of the country, where the

arbitration is agreed to be held, is the proper law of arbitration

agreement. Where the proper law of contract is expressly chosen by

the parties, such law must, in the absence of an unmistakable intention

to the contrary, govern the arbitration agreement. All the matters in

respect of arbitration agreement fall within the conclusive competence

of the Courts of the country whose law govern the arbitration

agreement.

32. In the present case, the petitioner has not been able to point out

any fact or circumstance, or any clause of the agreement to even

remotely suggest (far from unmistakably suggest) that the parties ever

intended that the proper law of arbitration would be the Indian law and

not the substantive law of the contract.

33. For the reasons aforesaid I hold by agreement of parties that

Part-I of the Arbitration & Conciliation Act, 1996 stands excluded and,

therefore, this court does not have jurisdiction to entertain this

petition.

34. Dismissed.

A copy of this order be given dasti under the signature of the

Court Master.

VIPIN SANGHI, J

AUGUST 03, 2011 'BSR'/SR