Appeal No.337 of 2013,Arbitration Petition No.636 of 2011

6th August, 2013

Petitioner Counsel: Mr. ASPI CHINOY, Sr. Adv. with Mr. DARIUS SHROFF, Sr.Adv., Mr. SUJAI KANTAWALLA, Mr. AMEY NABAR, Mr. SOURA GHOSH, Mr. AMEYA DEOSTHALE, and Ms. SUKHADA WAGLE i/b. M/s. HARIANI & CO.
Respondent Counsel: Mr. SHYAM MEHTA, Sr. Adv. with Mr. ASIF LAMPWALA, Mr. SUSHEEL CYRIAL and Mr. DEEPAK LAD i/b. ADVANI & CO.

Cases Cited:
Bharat Alluminium Company Vs. Kaiser Alluminium Technical Services Inc., 2012 ALL SCR 2831=(2012) 9 SCC 552 [Para 2,7]
Bhatia International Vs. Bulk Trading S.A., (2002) 4 SCC 105 [Para 2]
National Thermal Power Corporation Vs. Singer company, (1992) 3 SCC 551 [Para 4,11]
Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd., 1998(1) ALL MR 715 (S.C.)=(1998) 1 SCC 305 [Para 4,12]
Indtel Technical Services Pvt. Ltd. Vs. W.S. Atkins Rail Limited, 2008 ALL SCR 2464=(2008) 10 SCC 308 [Para 4,5,14]
Naviera Amazonica Peruana SA Vs. Compania International De Seguros Del Peru, (1988) 1 Lloyd's Rep 116 CA [Para 9,12]
Shreejee Traco (I) Pvt. Ltd. Vs. Paperline International Inc., (2003) 9 SCC 79 [Para 15]
Dozco India Pvt. Ltd. Vs. Doosan Infracore Co. Ltd., 2010 ALL SCR 2698=(2011) 6 SCC 179 [Para 15,18]
Inforwares Ltd. Vs. Equinox Corpn., (2009) 7 SCC 220 [Para 15]
Cauvery Coffee Traders, Mangalore Vs. Hornor Resources (International) Company Limited, 2012 ALL SCR 208=(2011) 10 SCC 420 [Para 16]
Videocon Industries Ltd. Vs. Union of India, AIR 2011 SC 2040 [Para 18]
Hardly Oil and Gas Limited Vs. Hindustan Oil Exploration Company Limited, (2006) 1 GLR 658 [Para 18]
Yograj Infrastructure Limited Vs. Ssang Yong Engineering and Construction Company Limited, 2011(6) ALL MR 464 (S.C.)=(2011) 9 SCC 735 [Para 19]
Yograj Infrastructure Limited Vs. Ssang Yong Engineeing and Construction Company Limited., (2012) 12 SCC 359 [Para 19]

JUDGMENT

DR. D. Y. CHANDRACHUD, J. :- Admit. By consent of the learned counsel and at their request the Appeal is taken up for hearing and final disposal.

2. The appeal arises from a judgment of a Learned Single Judge dated 15 November 2011, holding that this Court had no jurisdiction to entertain a challenge to the award of an arbitral tribunal constituted by the Refined Sugar Association, London. The appeal relates to the period prior to the applicability of the judgment of the Supreme Court in Bharat Alluminium Company Vs. Kaiser Alluminium Technical Services Inc. (BALCO) (2012) 9 SCC 552 : [2012 ALL SCR 2831] In the decision in BALCO, the Supreme Court held that Part-I of the Arbitration and Conciliation Act, 1996, would have no application to international commercial arbitration held outside India. In holding this, the Supreme Court overruled the earlier judgment in Bhatia International vs. Bulk Trading S.A. (2002) 4 SCC 105 However, the Constitution Bench of the Supreme Court has held and directed that the law now declared by the Court shall apply prospectively to all arbitration agreements executed thereafter. The arbitration agreement in the present case, was admittedly entered into before the judgment of the Constitution Bench. The rights and obligations of the parties, in so far as the appeal is concerned, are, therefore, governed by the regime which prevailed as long as the judgment of the Supreme Court in Bhatia International held the field. The decision in Bhatia International had taken the view that the provisions of Part-I of the Arbitration and Conciliation Act, 1996, would apply to international commercial arbitration held out of India "unless the parties by agreement, express or implied, exclude all or any of its provisions" at para 32 page 123. The issue which falls for determination in the appeal is whether parties in this case by their agreement, express or implied, have excluded all or any of the provisions of Part-I of the Act of 1996.

3. The Appellant is an Indian Company which carries on the business of import and export of sugar among other commodities. The Respondent is a Swiss Company with whom the Appellant entered into an agreement on 12 January 2010 for the purchase of 2700 metric tons of Brazilian white sugar of a stipulated description. The sugar was to be shipped between 15 January 2010 and 15 February 2010 at the option of the seller, the Respondent. The port of destination was to be Nhava Sheva or Kolkata at the option of the Appellant. Disputes arose between the parties. The agreement between the parties contained inter alia the following terms and conditions:

"Terms and conditions:

This Contract is subject to the Rules of The Refined Sugar Association, London as fully as if the same had been expressly inserted herein, whether or not either or both parties to it are Members of the Association.

If any provision of this Contract is inconsistent with the Rules, such provision shall prevail."

Parties envisaged that all disputes would be submitted to arbitration. The arbitration agreement was thus:

"Arbitration : All disputes arising out of or in conjunction with this Contract shall be referred to The Refined Sugar Association, London for settlement in accordance with the Rules relating to Arbitration. This Contract shall be governed by and construed in accordance with English Law."

A final award was passed by the arbitral tribunal on 31 December 2010 which was sought to be challenged by the Appellant in proceedings under Section 34 of the Act of 1996 before the Learned Single Judge of this Court. An objection was taken to the jurisdiction of this Court to entertain the petition on the ground that the applicability of Part-I of the Act was excluded by the agreement between the parties and consequently even under the law as it then prevailed in Bhatia International, a Petition under Section 34 was not maintainable. The Learned Single Judge has upheld the objection and has come to the conclusion that this Court has no jurisdiction to entertain a challenge to the award under Section 34. The judgment is called in question in appeal.

4. Learned Senior Counsel appearing on behalf of the Appellant submits that:

(i) During the interregnum when the law as laid down in Bhatia International held the field, the Act of 1996 will apply to an international commercial arbitration with a seat outside India unless there is an express selection by the parties of a foreign law relating either to the arbitration agreement or to the conduct of arbitral proceedings. Absent such an express selection of a foreign law, the Act of 1996 would apply;

(ii) In the present case, parties when they entered into an arbitration agreement while executing the contract for the sale and purchase of sugar, specifically did not incorporate the clause recommended by the Refined Sugar Association, London more specifically, the provision that the arbitration shall be conducted in accordance with English law. There was a specific deletion by the parties of the reference to the curial law being the law of England;

(iii) There is no specific selection by the parties in the present case, of a foreign curial law or a foreign law governing the agreement to arbitrate and in the absence of an express selection to that effect, Part-I of the Act of 1996 would apply in view of the principles laid down in Bhatia International;

(iv) After the decision in Bhatia International, the situs of an international commercial arbitration with a seat outside India would not constitute a ground for excluding the applicability of Part-I;

(v) Once the decision in Bhatia International came to be pronounced by a Bench of three Learned Judges, the earlier decisions in National Thermal Power Corporation vs. Singer company, (1992) 3 SCC 551 and in Sumitomo Heavy Industries Ltd. vs. ONGC Ltd., (1998) 1 SCC 305 : [1998(1) ALL MR 715 (S.C.)] would cease to govern and it has been so held in the judgment of the designate of the Hon'ble Chief Justice of India in Indtel Technical Services Pvt. Ltd. vs. W.S. Atkins Rail Limited. (2008) 10 SCC 308 : [2008 ALL SCR 2464].

5. On the other hand, it has been urged on behalf of the Respondent by the Learned Senior Counsel that:

(i) In the present case, the rules of the Refined Sugar Association have been incorporated into the contract. The proper law of contract is English law while the procedural law of arbitration would be governed by the RSA Rules which in turn are consistent with English law. The RSA Rules provide for the applicability of English curial law;

(ii) Rule 8 of the RSA Rules stipulates that for the purpose of all proceedings in arbitration, the contract shall be deemed to have been made in England and England shall be regarded as the place of performance. Besides, Rule 8 stipulates that disputes shall be settled according to the law of England wherever the domicile, residence or place of business of the parties to the contract may be or become. The settlement of disputes would cover the manner in which the disputes would be resolved, apart from the substantive law and hence would include a challenge to the arbitral award;

(iii) In the circumstances, the curial law is provided for in the contract between the parties and since the parties have chosen to abide by the provisions of English law, that would necessarily exclude the application of Part-I of the Indian Act of 1996;

(iv) Alternatively, even if the curial law was not provided for by the parties, the judgment in Bhatia International does not rule out the possibility of the provisions of Part-I being excluded in their application by the proper law governing the contract being a foreign law;

(v) The judgment of the Supreme Court in Sumitomo holds that the curial law will apply until the award is made and thereafter the law that would apply would be the governing law of arbitration. The decision of the Supreme Court in NTPC held that the proper law of arbitration would normally be the same as the proper law of contract in the absence of a contrary indication. Both these decisions have held the field and have not been overruled in Bhatia International or, for that matter, by the subsequent decision of the designate of the Chief Justice of India in Indtel, [2008 ALL SCR 2464] (supra). The decision in Indtel involved an application under Section 11 of the Act of 1996 and since the case did not pertain to a challenge to an award under Section 34, the decision in Sumitomo did not fall for consideration. Hence, it has been urged that while the proper law is the law which governs the agreement between the parties, in the absence of any other stipulation in the arbitration clause as regards the law which would apply to the arbitration proceedings, it is the law governing the contract which is also the law applicable to the arbitral tribunal.

6. These submissions fall for consideration.

7. The Constitution Bench of the Supreme Court has in the decision in BALCO, [2012 ALL SCR 2831] (supra) held that the earlier decision of three learned Judges in Bhatia International does not reflect the correct position in law. Consequently, after the decision in BALCO, the position in Indian law is now authoritatively settled: Part-I of the Act of 1996 has no application to an international commercial arbitration held outside India. Consequently, in a foreign seated international commercial arbitration, no application for interim relief under Section 9 can be maintained, nor can a petition lie under Section 34 for challenging the validity of the award. The continued relevance of the decision in Bhatia International, in so far as this Court is concerned, arises by reason of the fact that the Constitution Bench, while overruling the earlier decision, directed that the law declared in BALCO shall apply prospectively to all arbitration agreements executed thereafter. Consequently, and though the principle of law laid down in Bhatia International has now been overruled in BALCO, for the purposes of this case which relates to an arbitration agreement executed prior to the decision in BALCO, the issue raised in the appeal would turn upon an interpretation of the decision in Bhatia International and the law which was laid down there. The appeal raises an issue of a considerable degree of significance since Courts in India would be required to construe the observations in Bhatia International for the purposes of deducing the consequence of international commercial agreements that were entered into prior to the decision of the Constitution Bench in BALCO. It is from this perspective that we must necessarily turn to the decision in Bhatia International and construe whether in terms of the law that was laid down in that decision, a petition under Section 34 of the Act of 1996 would be maintainable before this Court to challenge the validity of an arbitral award in a foreign seated international commercial arbitration.

8. Bhatia International held that: (i) Part-I of the Act of 1996 would apply to arbitration held in India and parties would be free to derogate only to the extent to which this was permissible under the relevant provisions of Part- I; and (ii) In cases of international commercial arbitration held out of India, Part-I would apply unless parties by agreement, express or implied, exclude any of its provisions. The observation in Bhatia International is to the following effect :

"To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. 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."

The crucial words upon which the submissions in the appeal turn, are "unless the parties by agreement, express or implied, exclude all or any of its provisions". These observations of the Supreme Court would indicate that for Part-I not to apply to an international commercial arbitration held out of India, the parties must exclude by their agreement, which may be either express or implied, all or any of its provisions. An express agreement excluding the applicability of the provisions of Part-I is where the parties in their agreement specifically and categorically provide that some or all of the provisions of Part- I shall have no application. But parties, in addition, may by implied agreement exclude all or any of its provisions as well. Something which is implied is obviously something that is not expressly provided to govern in certain events, and it is for the Court to determine whether the parties in the terms of the contract that they have adopted intended to exclude the applicability of Part-I. The submission of the Appellant is that before the Court can draw an inference of an implied exclusion, there must, by the agreement of the parties, be a specific incorporation of a foreign law either in the agreement to arbitrate or in the curial law governing the conduct of the arbitration. It is to this aspect that we now turn.

9. Where parties to an international commercial agreement enter into contractual dealings, the foreign element involved in the contract may be regulated by three systems of law. This is indicated in the locus classicus on the subject which is the judgment of the Court of Appeal in the U.K. in Naviera Amazonica Peruana SA vs. Compania International De Seguros Del Peru. (1988) 1 Lloyd's Rep 116 CA The Court of Appeal adverted to three potentially relevant systems of law thus:

"A. All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law. (1) The law governing the substantive contract. (2) The law governing the agreement to arbitrate and the performance of that agreement. (3) The law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) will often be different from (2) and (3). And occasionally, but rarely, (2) may also differ from (3)."

Mustill and Boyd in their Law and Practice of Commercial Arbitration in England Second Edition adverted to (i) The proper law of the contract; (ii) The proper law of the arbitration agreement; and (iii) The curial law :

"It may be therefore be seen that problems arising out of an arbitration may, at least in theory, call for the application of any one or more of the following laws-

-1. The proper law of the contract, i.e. the law governing the contract which creates the substantive rights of the parties, in respect of which the dispute has arisen.

-2. The proper law of the arbitration agreement, i.e., the law governing the obligation of the parties to submit the disputes to arbitration, and to honour an award.

-3. The curial law, i.e., the law governing the conduct of the individual reference."

10. The principle of party autonomy in an international commercial agreement may lead to the contract incorporating provisions on all these three aspects. The first is the governing law of the contract which defines the substantive rights and obligations of the parties. The second is the law which governs the arbitration agreement. This includes questions as to whether the dispute is arbitrable; the jurisdiction of the arbitral tribunal to make an award and the validity of the award itself. The third aspect is the curial law of arbitration which governs the manner in which the arbitrator would conduct the arbitral proceedings and would extend to procedural matters and the regulation of the conduct of the arbitration. Questions of evidence would fall within that description. The curial law governs the conduct of the arbitral proceedings until an award is finally made by the arbitral tribunal. Parties to a transnational commercial contract may in the course of negotiation decide upon the applicability of a system of law on all three aspects. It is not necessary that parties must abide by the same system of law on all the three aspects. The governing law of the contract may be the law of a particular jurisdiction. On the other hand, the law governing the arbitration agreement and the curial law governing the conduct of arbitral proceedings may not necessarily be the same as the law governing the substantive obligations of the parties under the contract. Moreover, as between the law governing the arbitration agreement (the proper law governing the arbitration) and the curial law, parties may not necessarily choose the same system of law to apply.

11. Now, it is in this background that it would be necessary for the Court to have due regard to two leading judgments of the Supreme Court which were delivered prior to the decision in Bhatia International. Bhatia International, as we shall shortly explain, does not affect the validity of the essential principle laid down in these decisions. The first decision in National Thermal Power Corporation vs. Singer Company, (1992) 3 SCC 551 involved a case where the High Court had held that it had no jurisdiction to consider the validity of an award in a foreign seated international commercial arbitration and the Arbitration Act of 1940 would have no application. The governing law of the contract in that case was of India; the arbitration was to be governed by the Rules of the International Chamber of Commerce, Paris while the seat of the arbitration was to be London. The judgment of the Supreme Court held that normally the proper law of the arbitration agreement is the same as the proper law of the contract and it is only in exceptional cases that this would not be so despite the fact that the proper law of contract was expressly chosen by the parties. At para 23 page 563 The judgment of the Supreme Court holds as follows :

"The parties have the freedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as the law of the country in which the arbitration is agreed to be held. On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, in nevertheless a part of such contract."

In that case, the Supreme Court held that the proper law of the contract was expressly stipulated to be the law of India and exclusive jurisdiction had been conferred on the court in Delhi in all matters arising under the contract. Hence, parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement was held to be the law in force in India.

12. The judgment in NTPC was of two Learned Judges. The second judgment in Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd., (1998 1 SCC 305) : [1998(1) ALL MR 715 (S.C.)] was of a Bench of three Learned Judges. In that case, the proper law of contract was Indian law; the seat of the arbitration was London and the ICC Rules were to govern the procedure for arbitration. The arbitral tribunal rendered an award. ONGC sought a direction to the umpire to file the award in Court and such a direction was granted by a learned Single Judge of this Court. The Supreme Court in Sumitomo noted the principles of law laid down in the judgment of the Court of Appeal in Naviera Amazonica (supra) and the position as stated in Mustill and Boyd and held that the curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and conduct of the arbitration. The Supreme Court further observed as follows:

"Where the law governing the conduct of the reference is different from the law governing the underlying arbitration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference should be conducted, "and then returns to the first law in order to give effect to the resulting award".

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."

13. Sumitomo is, therefore, authority for the principle that the law which would apply to the enforcement of the award and for an action questioning the validity of the award would be the law governing the agreement to arbitrate and the performance of that agreement. NTPC, as noted above, affirms the principle that choice of a proper law of contract implies, in the absence of an unmistakable intention to the contrary, the choice of the same law as the proper or governing law of the arbitration agreement. The decision in Bhatia International does not affect the validity of these principles which have been enunciated in the judgment in NTPC and in Sumitomo. In fact, the Supreme Court in Bhatia International was not dealing with either of the two issues, namely, (i) whether the choice of the governing law of the arbitration agreement, would follow from the choice of the proper law of contract. or (ii) which law would apply to the challenge of an arbitral award, whether the law governing the arbitration agreement or the curial law relating to the conduct of the arbitration. The issue before the Supreme Court in Bhatia International was whether or not Part-I would apply to a foreign seated international commercial arbitration. Bhatia International hence, did not affect or overrule the fundamental premise of the two decisions in NTPC and Sumitomo referred to above. These principles postulate that parties to an international commercial arbitration in making a choice as regards the substantive law governing the arbitration agreement and the curial law governing the conduct of the arbitration, may do so either expressly or by implication. If an express choice is made by the parties, that is a matter which is self evident. But even in the absence of an express choice by the parties in regard to the substantive law governing the arbitration agreement or curial law, when the proper law of contract has been specifically chosen that law would, in the absence of an unmistakable intention to the contrary govern the arbitration agreement. The law which governs an action for setting aside or questioning the validity of an award in an international commercial arbitration would be the law governing the agreement to arbitrate and the performance of that agreement. Bhatia International has not overturned these principles.

14. But the submission which has been urged on behalf of the Appellant is that a decision which was rendered by the designate of the Chief Justice of India in a proceeding under Section 11 of the Act of 1996, in Indtel Technical Services Pvt. Ltd. vs. W.S. Atkins Rail Limited, (2008) 10 SCC 308 : [2008 ALL SCR 2464] casts a doubt on the applicability of the NTPC principle in the post Bhatia regime. Now Indtel was a case where parties to an international commercial agreement had agreed that the substantive law governing the agreement would be the English law. Parties had neither made a choice in regard to the curial law governing the procedure of the arbitration nor the seat of the arbitration. The Learned designate of the Chief Justice of India held as follows:

"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. Tripathi and the views of the jurists referred to in NTPC case (1992) 3 SCC 551 support such a proposition. What, however, distinguishes the various decisions and views of the authorities in this case is the fact that in Bhatia International 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 or arbitration is in India, even in respect of international commercial agreements, which are to be governed by the 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."

The judgment in Indtel thus recognised as a fairly well settled principle that when an arbitration agreement is silent on the law and procedure to be followed in implementing the arbitration agreement, the law governing the arbitration agreement would ordinarily be the same as the law governing the contract. This was, however, distinguished on the facts of that case following Bhatia International. Indtel was a case where there was a proceeding under Section 11 before the designate of the Chief Justice of India and in a situation where parties had neither agreed to the seat of the arbitration or the curial law. An arbitration with a seat in India was permissible under the contract between the parties. Hence, the designate of the Chief Justice of India held that whatever be the applicable law of arbitration, Part-I would apply under the Bhatia principle.

15. Prior to the decision in Indtel, another decision of the designate of the Chief Justice of India in a proceeding under Section 11 was rendered in Shreejee Traco (I) Pvt. Ltd. vs. Paperline International Inc.(2003) 9 SCC 79 This was a case where the seat of the arbitration was in New York. Parties had not indicated a choice of law. It was held there that though there was no express choice of law governing the contract as a whole or the arbitration agreement in particular a presumption would arise in the absence of a contrary indication that parties intended that the proper law of the contract as well as the law governing the arbitration agreement would the same as the law of the country in which the arbitration is agreed to be held. A later decision again of the designate of the Chief Justice of India in a proceeding under Section 11 was in Dozco India Pvt. Ltd. vs. Doosan Infracore Co. Ltd. (2011) 6 SCC 179 : [2010 ALL SCR 2698] That was a case where the substantive law governing the contract was Korean law (under Article 22 of the agreement); the seat of the arbitration was to be Seoul, Korea and the Rules of the International Chamber of Commerce were to be applied to the conduct of the arbitration. The decision relied on the judgment in Sumitomo and on the observations in Mustill and Boyd. Indtel was distinguished on the ground that parties had not chosen the law governing arbitration procedure, including the seat of the arbitration and it was, therefore, that the Court exercised the jurisdiction under Section 11(6). In the case at hand, it was held that both having regard to Articles 22.1 and 23.1, it was clear that parties had agreed that the disputes arising out of the agreement would be finally settled in Seoul, Korea; that the rules of arbitration of ICC would apply which was held to be indicative of the implied exclusion of Part-I. The conclusions in that case were as follows:

"In that view, my inferences are that :

(i) The clear language of Articles 22 and 23 of the distributorship agreement between the parties in this case spells out a clear agreement between the parties excluding Part I of the Act.

(ii) The law laid down in Bhatia International v. Bulk Trading S.A.(2002) 4 SCC 105 and Indtel Technical Services (P) Ltd. v. W.S.Atkins Rail Ltd.,(2008) 10 SCC 308 as also in Citation Inforwares Ltd. v. Equinox Corpn. (2009) 7 SCC 220 is not applicable to the present case.

(iii) Since the interpretation of Article 23.1 suggests that the law governing the arbitration will be Korean Law and the seat of arbitration will be Seoul in Korea, there will be no question of applicability of Section 11(6) of the Act and the appointment of arbitrator in terms of that provision."

16. The subsequent decision of the designate of the Chief Justice of India in a proceeding under Section 11 in Cauvery Coffee Traders, Mangalore vs. Hornor Resources (International) Company Limited, (2011) 10 SCC 420 : [2012 ALL SCR 208] involved a situation where the situs of the arbitration was to be in a foreign country. At para 7 page 425 The Learned designate held that the view which was taken in Shreejee Traco would not have binding effect on the ground that it was contrary to the law laid down in Bhatia International.

17. At this stage, it would be necessary to again clarify that Shreejee Traco was a case where only the situs of the arbitration was outside India and parties had not made a decision on the choice of law either governing the contract as a whole or in regard to the arbitration agreement. That by itself, in the Bhatia regime would not result in the exclusion of Part-I of the Act of 1996. So long as the judgment in Bhatia International held the field, Part-I of the Act of 1996 would not be excluded merely by the choice of the seat of arbitration being outside India. The situation in Shreejee Traco and in Cauvery Coffee Traders thus involved contracts where only the seat of the arbitration was in a foreign country. This in the Bhatia regime would not by itself result in the exclusion of Part-I. On the other hand, where apart from the foreign seat of the international commercial arbitration, there are other indicative circumstances emanating from the agreement between the parties by which the choice of law in regard to the governing law of the contract is a foreign law as in Dozco and the rules of a foreign arbitral institution such as the ICC have been adopted by the parties that has been held to be indicative of an implied agreement excluding the application of Part-I.

18. In Videocon Industries Ltd. vs. Union of India, AIR 2011 SC 2040 the issue related to the applicability of the provisions of Section 9 of the Act of 1996 to a case involving an international commercial agreement where (i) The proper law of the contract was Indian law; (ii) The seat of the arbitration was Kuala Lumpur, Malaysia; and (iii) The arbitration agreement was to be governed by English law. The Supreme Court held that a change of the venue would not result in a change of the seat of arbitration and referred to the decision in Dozco, [2010 ALL SCR 2698] (supra). The Supreme Court affirmed the view in a judgment of a Learned Single Judge of the Gujarat High Court in Hardly Oil and Gas Limited vs. Hindustan Oil Exploration Company Limited.(2006) 1 GLR 658 Hardly Oil involved a case where the substantive law governing the contract was Indian law; the law governing the arbitration agreement was to be English law and the seat of the arbitration was London with the rules of the London Court of International Arbitration governing the arbitration. The Gujarat High Court held in those facts that there was a specific provision that the law governing the arbitration would be English law and hence, Part-I would stand excluded. The Bench of two learned Judges of the Supreme Court affirmed the correctness of the view of the learned Single Judge of the Gujarat High Court. In the case at hand, it was held that parties had agreed that the arbitration agreement shall be governed by the law of England which necessarily implied that they had agreed to exclude the provisions of Part-I.

19. Finally, we may refer to a decision of two learned Judges of the Supreme Court in Yograj Infrastructure Limited vs. Ssang Yong Engineering and Construction Company Limited, (2011) 9 SCC 735 : [2011(6) ALL MR 464 (S.C.)] where the substantive law governing the arbitration agreement was Indian law while the seat of the arbitration was Singapore, with the arbitration being governed by the Law of Singapore (the reference to SIAC rules in the original order was later corrected in a clarificatory order of the Supreme Court in Yograj Infrastructure Limited vs. Ssang Yong Engineeing and Construction Company Limited. (2012) 12 SCC 359 The Supreme Court held as follows:

"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."

20. In the present case, the parties have specifically made their contract subject to the rules of the Refined Sugar Association, London. Leaving no ambiguity of interpretation the contract mandates that the rules of the Refined Sugar Association, London are incorporated "as fully as if the same has been expressly inserted" in the contract. The governing law of the contract is English law. All disputes arising out or in conjunction with the contract were to be referred to the Refined Sugar Association for settlement in accordance with the rules relating to arbitration of the Association. The law in the U.K. is, therefore, the substantive law of the contract. The seat of the arbitration is in the U.K. Parties have made it clear that the rules of the Refined Sugar Association would govern the resolution of their disputes. Rule 8 of the Rules of the Refined Sugar Association (on which there is no dispute between the parties during the course of the hearing of the appeal) provides as follows:

"8. For the purpose of all proceedings in arbitration, the contract shall be deemed to have been made in England, any correspondence in reference to the offer, the acceptance, the place of payment or otherwise, not-with-standing, and England shall be regarded as the place of performance. Disputes shall be settled according to the law of England wherever the domicile, residence or place of business of the parties to the contract may be or become. The seat of the Arbitration shall be England and all proceedings shall take place in England. It shall not be necessary for the award to state expressly the seat of the arbitration."

The terms of the purchase contract as well as Rule 8 of the Rules of the Refined Sugar Association would make it clear that disputes shall be settled in accordance with the law of England wherever the domicile, residence or place of business of parties to the contract may be or become. Moreover, for the purposes of all proceedings in arbitration, the contract shall be deemed to have been made in England and England shall be regarded as the place of performance. The seat of the arbitration shall be England and all proceedings shall take place in England. On the basis of these provisions, it has been submitted that parties have, by the terms of their agreement, impliedly excluded the provisions of Part-I. We find merit in the submission. It is clear from the terms and conditions which have been accepted by the parties in the purchase contract, read with Rule 8 that parties have accepted English law as the governing law of the contract; that the seat of the arbitration would be London; that disputes shall be settled according to the law of England which would include the resolution of disputes and that all proceedings shall take place in England. Alternatively, even if it were to be held that parties have not provided for the curial law governing the arbitration, the decision in Bhatia International does not prohibit the exclusion of the application of Part-I on account of the proper law of the contract being a foreign law. Where the proper law governing the contract is expressly chosen by the parties, which they have done in the present case by selecting English law as the proper law of the contract, that law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement. The arbitration agreement, though it is collateral or ancillary to the main contract is nevertheless a part of the contract. In an application for challenging the validity of an arbitral award under Section 34, the Court would necessarily have to revert to the law governing the arbitration agreement, which, in our considered view, would be the law of England.

21. In this view of the matter and for the reasons that we have indicated, we have come to the conclusion that this Court has no jurisdiction to entertain the petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an international commercial award of an arbitral tribunal constituted by the Refined Sugar Association, London. The judgment of the Learned Single Judge does not suffer from any error. The appeal is accordingly dismissed. There shall be no order as to costs.

22. After the conclusion of the judgment, Counsel appearing on behalf of the Appellant seeks an extension of the ad-interim protection which was granted by an order of the Division Bench dated 4 September 2012 during the pendency of the appeal. On 4 September 2012, the Division Bench recorded that the statement which was made by Counsel appearing on behalf of the Respondent on 13 February 2012 that the Respondent shall not take steps for execution of the award will continue till the next date of hearing. In order to enable the Appellant to have recourse to its remedies against this judgment, we extend the protection which was granted by the Division Bench on 4 September 2012, for a period of four weeks from today.

Appeal dismissed.