Aastha Broadcasting Network Ltd. vs Thaicom Public Company Ltd.
2011 Latest Caselaw 5856 Del

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*         IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            FAO(OS) 411/2011

AASTHA BROADCASTING NETWORK LTD.             ..... Appellant
            Through: Mr. Vivek Chib & Mr. Joby P. Varghese,
                     Advocates.

                                       versus

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

CORAM:
HON'BLE MR. JUSTICE SANJAY KISHAN KAUL
HON'BLE MR. JUSTICE RAJIV SHAKDHER

                                    ORDER

%                                   01.12.2011

SANJAY KISHAN KAUL, J. (Oral)

1. The appeal seeks to raise the issue of competency of the Delhi High Court to hear objections filed under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the „said Act‟) qua an arbitral award dated 3.4.2011 passed by an Arbitral Tribunal in an International Commercial Arbitration.

2. The appellant sought to file objections and the respondent disputed the jurisdiction of the Court to entertain the application under Section 34 of the said Act as being an International Commercial Arbitration, the application of the provisions of Part-I of the said Act stood excluded. This plea of the respondent found favour with the learned single Judge in terms of the impugned order dated 3.8.2011.

3. It is not in dispute that as per Clause 13 of the Agreement dated

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29.5.2000, any claim was subject to and construed in accordance with the laws of the Republic of Singapore. Clause 14 of the Agreement provided for resolution of disputes through arbitration and the rules of the United Nations Commission on International Trade Law (UNCITRAL) were to apply with the arbitration to be held in Singapore and in the English language. In these circumstances, the respondent pleaded that the substantive law applicable to the Agreement was the law of Singapore and, thus, the jurisdiction of the Delhi High Court was excluded.

4. On the other hand, it was the plea of the learned counsel for the appellant before the learned single Judge that the applicability of Part-I of the said Act was not excluded, more so, when the respondent itself had approached the Chief Justice of India for filling up of vacancy created by the resignation of the nominated arbitrator of the appellant by filing an application under Section 11 (6) of the said Act, which had been allowed on 6.8.2010 and a review sought by the appellant did not find favour vide order dated 19.7.2011.

5. In the impugned order, the learned single Judge has discussed various judicial pronouncements on this issue. In this context, the conclusion in Videocon Industries Limited Vs. Union of India & Anr. 2011 (5) SCALE 678, was referred to: the High Court did not have jurisdiction to entertain the petition under Section 9 of the said 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 respondent therein. Even in a case where substantive law applicable to the contract was agreed to be the Indian law, it was held that the law of arbitration need not necessarily be the Indian law and the parties had a right to prescribe a separate system of law for application to the arbitration agreement.

6. The learned single Judge referred to the judgement in Indtel _____________________________________________________________________________

Technical Services Private Limited Vs. W.S. Atkins Rail Limited (2008) 10 SCC 308, which analyzed the ratio of Bhatia International Vs. Bulk Trading S.A. & Anr. (2002) 4 SCC 105. The learned single Judge has held that the ratio of Bhatia International case (supra) would prevail that being a judgement of a larger Bench and, thus, in case of international commercial arbitration held out of India provisions of Part-I of the said Act would apply unless the parties by agreement, express or implied, exclude all or any of its provisions and in that case the law or the rules chosen by the parties would prevail.

7. The learned single Judge has also held that Clauses 13 & 14 in issue in the present case are para materia with the corresponding clauses in Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd. AIR 1998 SC

825. It has, thus, been held by the learned single Judge that the applicability of Part-I of the said Act would stand excluded.

8. Learned counsel for the appellant before us made his submissions confined to a limited aspect, i.e., the consequences which flowed from the application filed by the respondent under Section 11(6) of the said Act. Learned counsel referred to the judgement in SBP & Co. Vs. Patel Engineering Ltd. & Anr. (2005) 8 SCC 618, to contend that the power exercised under Section 11 (6) of the said Act, being a judicial power and not an administrative power, it would necessarily flow in the facts of the present case that the learned single Judge would have the authority to decide the objections under Section 34 of the said Act as the Supreme Court had exercised power under Section 11 (6) of the said Act. Learned counsel submitted that the learned single Judge has erroneously concluded that in the review application, the appellant had not raised this issue since the very application was predicated on the reasoning that the Supreme Court ought not to have exercised jurisdiction under Section 11 (6) of the _____________________________________________________________________________

said Act as the arbitration was to be governed by the rules of UNCITRAL which provided their own procedure for appointment of an arbitrator who may have resigned which had admittedly not been followed in the present case.

9. Another judgement which has been brought to our notice is of the Division Bench in FAO (OS) No.316/2011 titled Anita Garg Vs. M/s. Glencore Grain Rotterdam B.V. decided on 11.8.2011, where it has been inter alia held that Sections 9 & 34 of the said Act do not pertain to curial law. Section 34 of the said Act is attracted to events post the publication of the award where the Arbitral Tribunal has already been rendered functus officio. If a contract stipulates that the functioning of the Arbitral Tribunal shall be governed by laws in a foreign country, whereas the substantive or contract law will be governed by Indian laws, Section 9 as well as Section 34 of the said Act will be maintainable.

10. Learned counsel for the respondent has strongly relied upon the recent judgement of the Supreme Court in Yograj Infrastructuve Ltd. Vs. Ssang Yong Engineering & Construction Co. Ltd. 2011 (9) SCALE 567. In the facts of the case the arbitration proceedings were to be conducted in Singapore in accordance with the International Arbitration Centre Rules. The arbitrator appointed by the Singapore International Arbitration Centre (for short „SIAC‟) passed an interim award and an appeal was filed under Section 37 (2) (b) of the said Act. The District Judge dismissed the appeal as not maintainable since the seat of arbitration was in Singapore and the proceedings were to be governed by the laws of Singapore. The High Court also dismissed the appeal. The order of the High Court was sustained by the Supreme Court. It was observed that the question to be examined is as to what would be the law on the basis whereof the arbitral proceedings were to be decided keeping in mind the clauses in the _____________________________________________________________________________

Agreement and the Governing Law of the agreement. A distinction was, thus, drawn between the „proper law‟ of the contract and the „curial law‟ to determine the law which is to govern the arbitration itself. In the absence of any stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it was held that the settled law was the law governing the contract, which would also be the law applicable to the Arbitral Tribunal itself. The SIAC Rules were read to be curial law of the arbitration proceedings. It was observed that Part-I would apply not only in cases where the seat of arbitration is in India. It was further observed in the context of Bhatia International case (supra) that it was in certain situations that Part-I of the said Act would apply even if the seat of arbitration was not in India but once it was specifically agreed that the arbitration proceedings would be conducted in accordance with the SIAC Rules, the decision in Bhatia International case (supra) and subsequent decisions on the same lines would no longer apply.

11. It was further held that Section 42 of the said Act was applicable at the pre-arbitral stage where the arbitrator had not been appointed and once the arbitrator is appointed and the arbitral proceedings commenced, the SIAC Rules become applicable shutting out the applicability of Section 42 of the said Act and for that matter Part-I of the said Act, including the right of appeal under Section 37 of the said Act. We may usefully refer to para 39 of the judgement in Yograj Infrastructure case (supra), which reads as under:

"39. With regard to the effect of Section 42 of the Arbitration and Conciliation Act, 1996, the same, in our view was applicable at the pre-arbitral stage, when the Arbitrator had not also been appointed. Once the Arbitrator was appointed and the arbitral proceedings were commenced, the SIAC Rules became applicable shutting out the applicability of Section 42 and for that matter Part I of the 1996 Act, including the right of appeal under Section 37 thereof."

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12. If we examine the facts of the present case in the conspectus of the aforesaid position, we have no doubt that the view taken by the learned single Judge is the correct view in law. In fact, the subsequent pronouncement in Yograj Infrastructure case (supra), in our view, makes the issue no more res integra. Thus, once the arbitration proceedings commence and the UNCITRAL Rules become applicable in the present case as per the clauses in the agreement and the proceedings were governed as per clauses 13 & 14 of the Agreement referred to aforesaid, there can be no doubt that Part-I of the said Act would have no application to the present case. The invocation by the respondent of the provisions of Section 11 (6) of the said Act would, thus, not imply that the proceedings are to be governed by Part-I of the said Act, undisputedly the arbitration proceedings having taken place in Singapore.

13. We, thus, find no merit in the appeal.

14. Dismissed.

SANJAY KISHAN KAUL, J.

DECEMBER 01, 2011                         RAJIV SHAKDHER, J.
b'nesh

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