Notice of Motion No. 3975 of 2009,Arbitration Petition No. 561 of 2009

5th October, 2011

Petitioner Counsel: Mr. PRASHANT PRATAP, HARSH PRATAP
Respondent Counsel: Mr. NITIN THAKKAR, Mr. SHARAN JAGTIANI, PRAKASH SHINDE, Mr. AVINASH GAUTAM SINGH

Cases Cited:
Kumbha Mawji Vs. Dominion of India, AIR 1953 SC 313 : 1953 SCR 878 [Para 18,21]
M/s. I.T.I. Ltd., Allahabad Vs. District Judge, Allahabad & ors., AIR 1998 Allahabad, 313 [Para 21]
Shiva Carriers Vs. Royal Projects Ltd. & ors., AIR 2000 Calcutta 138 [Para 21]
Gammon India Ltd., Mumbai Vs. Sankaranarayana Construction (Bangalore) Pvt. Ltd., (2009) 1 MLJ 740 [Para 21]
National Highways Authority of India Vs. SPCL-IVRCL (JV), 2008(2) Arb. LR 404 (Delhi) [Para 21]
Bhatia International Vs. Bulk Trading SA., (2002) 4 SCC 105 [Para 24]
Videocon Industries Limited Vs. Union of India & Anr., (2011) 6 SCC 161 [Para 26,28]
Hardy Oil & Gas Ltd. Vs. Hindustan Oil Exploration Company Ltd., (2006) 1 Gujarat Law Report, 658 [Para 28]

JUDGMENT

JUDGMENT :- The petition is filed under section 48 of the Arbitration & Conciliation Act, 1996, to enforce a foreign arbitration award dated 26th May, 2009.

2. By this Notice of Motion, the respondent has raised a preliminary objection as to the jurisdiction of this Court to entertain this petition. The objection is that the Respondent having filed Civil Miscellaneous Application No.101 of 2009 before the District Court of Jam Khambaliya, Gujarat under section 34 of the said Act for setting aside the said award prior to the filing of this petition, this Court has no jurisdiction to entertain this petition in view of section 42 of the said Act.

3. Section 42 of the Act is as follows :

"42. Jurisdiction.- Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."

I have held that an application under section 34 of the Act to set aside an award falls within the ambit of the phrase "with respect to an arbitration agreement". Thus if section 42 is applicable, that Court alone in which an application under section 34 is filed before any other relevant application shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. I have however come to the conclusion that in this case section 42 does not apply as the parties had impliedly if not expressly agreed to the exclusion of Part I of the Act which includes section 42. I have, accordingly, dismissed the Notice of Motion and ordered the petition to be heard on merits.

4. As the Notice of Motion is based only on a question of law, it is necessary to state the facts only briefly.

5. The parties had entered into a contract of affreightment dated 18th January, 2008 for various shipments of bauxite from India to China spread over the period 2008-2010. Clause 28 thereof reads as under:-

"Clause 28. Any dispute arising under this C.O.A. is to be settled and referred to Arbitration in London. One Arbitrator to be employed by the Charterers and one by the Owners and in case they shall not agree then shall appoint an Umpire whose decision shall be final and binding, the Arbitrators and Umpire to be Commercial Shipping Men. English Law to apply. Notwithstanding anything to the contrary agreed in the C.O.A., all disputes where the amount involved is less that USD 50,000/- (fifty thousand) the Arbitration shall be conducted in accordance with the Small Claims Procedure of L.M.A.A."

6. The respondent terminated the contract raising the ground of force majeure.

7. The petitioner denied the contention, accepted the termination as a repudiatory breach and reserved its right to claim damages. The petitioner lodged a claim for US$ 36 million, invoked the arbitration agreement and appointed an arbitrator. The respondent confirmed that it would appoint an arbitrator shortly, but failed to do so. Instead the respondent raised a new plea to the effect that the contract was illegal and void.

The respondent was afforded another opportunity of appointing an arbitrator, but it chose not to do so. Accordingly, on the petitioner's application, the English High Court appointed the arbitrator nominated by the petitioner as the sole arbitrator.

8. The respondent filed Special Civil Suit No.55 of 2008 in the Court of Principal Judge at Jam Khambaliya, Gujarat, on 11th November, 2008. An ex parte injunction was passed on the same day restraining the petitioner from taking steps pursuant to the arbitration clause. On the same day, similar suits were filed in respect of three similar contracts against three other parties. Similar ex parte ad-interim injunctions were passed in these three suits as well.

One of the parties in the other suits challenged the ex parte order dated 11th November, 2008 in the Gujarat High Court. The Gujarat High Court transferred the matter to the Jamnagar Court and expedited the hearing. The suit against the petitioner was also subsequently transferred.

The Principal Senior Civil Judge, Jamnagar, vacated the ex parte injunction and dismissed the respondent's interim application. It was held that the Court had no jurisdiction. The order was also passed on merits.

The respondent filed Appeal from Order No.27 of 2009 which, as I will mention shortly was withdrawn.

9. There was no stay granted by the Gujarat High Court of the arbitration proceedings. The respondent did not participate in the arbitration proceedings. The arbitrator made and published an award dated 26th May, 2009 in favour of the petitioner for an aggregate sum equivalent to about Rs.166 crores together with interest and costs. A copy of the award was forwarded to the respondent on 2nd June, 2009. The petitioner filed proceedings to declare the award enforceable as a judgment of the Court in the Courts in Netherlands, USA and Belgium and the English High Court. The respondent appeared and contested each of these proceedings. Each of these Courts declared the said award as enforceable as a judgment of the Court.

10. On 2nd July, 2009, the respondent unconditionally withdrew the said Appeal from Order No.27 of 2009 filed in the Gujarat High Court seeking liberty to challenge the award by adopting proceedings before the appropriate forum.

11. On 3rd July, 2009 the respondent filed Civil Miscellaneous Application No.101 of 2009 before the District Judge, Jam Khambaliya for setting aside the foreign award under section 34 of the said Act.

No orders were granted on the respondent's application for an injunction, restraining the petitioner from enforcing the said award anywhere outside India.

12. The present petition was filed on 27th July, 2009. The petitioner has taken out Notice of Motion No.3143 of 2009 therein seeking orders to secure the claim under the award.

13. As CMA No.101 of 2009 was filed before this petition, the respondent contends that this Court has no jurisdiction to entertain this petition in view of section 42 of the Act.

14. On 18th November, 2009, the petitioner filed Special Civil Application No.12021 of 2009 in the Gujarat High Court to quash the proceedings filed by the respondent in the Jam Khambaliya Court on the ground that the Court had neither territorial jurisdiction nor jurisdiction under section 34 of the Act.

By an order dated 20th November, 2009, the Gujarat High Court stayed further proceedings before the Jam Khambaliya Court.

On 24th December, 2009, the respondent filed Letters Patent Appeal No.2469 of 2009 before the Division Bench of the Gujarat High Court, challenging the order dated 20th November, 2009. By an order and judgment dated 22nd September, 2010, the Gujarat High Court held that the respondent was entitled to challenge the award under section 34 of the said Act.

On 18th January, 2011, the petitioner filed a petition for Special Leave to appeal to the Supreme Court, challenging the order and judgment dated 22nd September, 2010. By an order dated 8th February, 2011, the Supreme Court issued notice, stayed the judgment of the Division Bench of the Gujarat High Court and the proceedings before the District Court, Jam Khambaliya.

On 19th March, 2011, the respondent filed an affidavit. In paragraph 12, the respondent sought a stay of the proceedings pending before this Court viz. the present Arbitration Petition. To date, no stay has been granted by the Supreme Court of the present proceedings.

15. I had adjourned the hearing of this Notice of Motion as well as the pronouncement of this judgment on the respondents suggestion that the judgment of the Supreme Court may contain observations that may affect these proceedings and with a view to giving the parties an opportunity of applying to the Supreme Court for orders in respect of this petition. In view of the fact that though the respondent had sought a stay of these proceedings in the affidavit filed in the Supreme Court, no stay has been either sought or granted, I do not consider it necessary to further postpone the pronouncement of this judgment.

16. Mr. Thakkar submitted that in view of section 42 of the Act, this Court has no jurisdiction to entertain and try the petition. The submission was based on the fact that the respondent filed Civil Miscellaneous Application No.101 of 2009 before the District Court, Jam Khambaliya, under section 34 prior to the filing of this petition.

17. The first question is whether a petition under section 34 is an application "with respect to an arbitration agreement". If it is, the provisions of section 42 would apply, absent anything else. In my opinion, the question must be answered in the affirmative.

18. Mr. Thakkar relied upon the judgment of the Supreme Court in Kumbha Mawji vs. Dominion of India, AIR 1953 SC 313 = 1953 SCR 878. In that case, the respondent filed an application under section 14(2) of the Arbitration Act, 1940 before the Court of subordinate judge of Guwahati in Assam praying that the umpire be directed to file the awards in Court so that the petitioner might get an opportunity for filing objections thereto. Notice was issued to the umpire to file the awards in that court before 24th August, 1949. The umpire, by a letter dated 18th August, 1949 addressed to the subordinate judge, stated that he had handed over two awards made by him to the parties and forwarded copies of the same signed by him. The subordinate judge, by an order dated 24th August, 1949, noted the same and directed the applicant to file a copy on 3rd September, 1949. The respondents filed the award handed over to it by the umpire and the matter proceeded. On 17th August, 1949, i.e. a week after the respondents made its application, the appellants solicitors sent a letter to the Registrar of the High Court, Original Side, forwarding the original awards for filing and requested that the office be directed to file the two awards and to issue notice in respect thereof.

The Supreme Court noted that the filing of the awards in the Guwahati Court must be taken to be 24th August, 1949 and that the awards must be treated as filed in the Calcutta Court only on 29th August, 1949. Accordingly, the Supreme Court held that the earlier filing for the purpose of section 31(3) was in the Guwahati Court and not in the Calcutta Court. The Supreme Court then held :-

"11. Section 31, Arbitration Act of 1940, is in the following terms:

"(1) Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement under the agreement has been, or may be, filed and by no other Court.

(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be, filed and to no other Court.

(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in any reference an application under the Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court."

12. Sub-section (1) relates to the question as to where a completed award has to be filed and prescribes the local jurisdiction for that purpose. Sub-section (2) deals with the ambit of the exercise of that jurisdiction and declares it to be exclusive by saying that "all questions regarding the validity, effect or existence of an award or arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed and by no other Court"

Sub-section (3) is intended to provide that all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings are to be made only in one Court, and lays on the concerned party the obligation to do so. Then comes sub-s. (4), the object of which apparently is to go further than sub-s. (3), that is, not merely casting on the party concerned an obligation to file all applications in one Court but vesting exclusive jurisdiction for such applications in the Court in which the first application has been already made.

13. Thus it will be seen on a comprehensive view of S. 31 that while the first sub-section determines the jurisdiction of the Court in which an award can be filed, sub-ss. (2), (3) and (4) are intended to make that jurisdiction effective in three different ways (1) by vesting in one Court the authority to deal with all questions regarding the validity, effect or existence of an award or an arbitration agreement (2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one Court, and (3) by vesting exclusive jurisdiction in the Court in which the first application relating to the matter is filed. The context therefore, of sub-s. (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration. The necessity for clothing a single Court with effective and exclusive jurisdiction, and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced. There is no conceivable reason why the Legislature should have intended to confine the operation of sub-s. (4) only to applications made during the pendency of an arbitration if as is contended, the phrase "in any reference" is to be taken as meaning "in the course of a reference."

14. It may be noticed that the Arbitration Act deals with arbitrations of three different categories; (1) arbitration without intervention of the Court, dealt with in Ss. 3 to 19 comprising chap. II; (2) arbitration with the inte4rvention of a Court where there is no suit pending provided in S. 20 which is a separate chap. III; and (3) arbitration in suits dealt with in Ss. 21 to 25 comprising chap. IV. The jurisdiction as regards the later two classes of arbitrations in respect of certain matters is provided in the very provisions relating to those two classes or arbitrations, that is, S.2-, Sub-s. (1) and S. 21. Sub-section (1) of S. 31 appears to refer only to the first class. It may, therefore, have been, plausibly, suggested that Sub-ss. (2), (3) and (4) refer only to this class. But no such position was taken up before us. Indeed, having regard to the wide language employed in these sub-sections it has been assumed that sub-ss. (2) and (3) cover all three classes in all their stages. If so, is there any sufficient reason to think that sub-s. (4) was meant to have a very restricted operation? On the view of this sub-section suggested for the appellant, not only would an application made after the award was pronounced be excluded from sub-s. (4) but also an application made before the commencement of the arbitration i.e. for the filing of an agreement of reference and for a direction thereupon. It must be remembered that S. 31 is one of the group of sections headed "General" which by virtue of S. 26 are applicable to all arbitrations. Unless therefore the wording in sub-s. (4) of S. 31 is so compelling during the pendency of an arbitration, such a limited construction must be rejected.

15. As already stated, the entire basis of the limited construction is the meaning of the phrase "in any reference" used in sub-(s) 4 as meaning "in the course of any reference". But such a connotation thereof is not in any ordinary sense compelling. The proposition "in" is used in various contexts and is capable of conveying various shades of meaning. In the Oxford English Dictionary one of the shades of meaning of this proposition is :

"Expressing reference or relation to something; In reference or regard to; in the case of, in the matter, affair or province of.

Used especially with the sphere or department in relation or reference to which an attribute or quality is predicated."

In the context of S. 31, sub-s. (4), it is reasonable to think that the phase "in any matter of a reference." The word "reference" having been defined in this Act as "reference to arbitration," the phrase "in a reference" would mean "in the matter of a reference" is, therefore, comprehensive enough to cover also an application first made after the arbitration is completed and a final award is made, and in our opinion, that is the correct construction thereof in the context. We are, therefore, of the opinion that S. 31 (4) would vest exclusive jurisdiction in the Court in which an application for the filing of an award has been first made under S. 14 of the Act."

19. The Supreme Court, therefore, held that the words "in any reference" in section 31(4) cannot be equated with the words "in the course of a reference" and, accordingly, held that the provisions of section 31 were not confined to applications during the pendency of the arbitration.

20. The judgment would apply with equal force in respect of section 42 of the 1996 Act. The ambit of the phrase "with respect to an arbitration agreement" in section 42 of the 1996 Act is as wide if not wider than the ambit of the phrase "in any reference" appearing in section 31(4) of the 1940 Act. There is nothing in the phrase in section 42 that suggests it being applicable to applications at any particular stage of the arbitration proceedings. The Legislative intent with respect to section 42 of the 1996 Act is the same as it was under section 31(4) of the 1940 Act. An award is made pursuant to a reference. A reference is made pursuant to an arbitration agreement. The arbitration agreement is the genesis of all that happens till the award and even thereafter with respect to the award. The difference in the language of section 42 of the 1996 Act and section 31(4) of the 1940 Act, therefore, far from militating against Mr. Thakkar's submission strengthens it. Thus, an application to set aside an award under section 34 falls within the expression "with reference to an arbitration agreement" in section 42 of the 1996 Act.

21. Mr. Thakkar also relied upon the judgments of the various High Courts in support of his submission. [M/s. I.T.I. Ltd., Allahabad v. District Judge, Allahabad & ors., AIR 1998 Allahabad, 313; Shiva Carriers v. Royal Projects Ltd. & ors., AIR 2000 Calcutta, 138; Gammon India Ltd., Mumbai v. Sankaranarayana Construction (Bangalore) Pvt. Ltd., (2009) 1 MLJ 740 and National Highways Authority of India v. SPCL-IVRCL (JV) 2008(2) Arb. LR 404 (Delhi).]

In view of the judgment of the Supreme Court, it is sufficient to note the following observations of the learned single Judge of the Allahabad High Court M/s. I.T.I. Ltd., Allahabad v. District Judge, Allahabad & ors., AIR 1998 Allahabad, 313 :-

"8. The phrase "with respect to an arbitration agreement" used in Sec. 42 of the Act is of wide connotation and its embrances within its sweep an application for setting aside an arbitral award on grounds specified in Sec. 34 of the Act. It may usefully be stated here that arbitral proceedings terminate by the final award or by an order of the Arbitral Tribunal under Sec. 33 and sub-section (4) of Sec.34 as visualised by sub-section (3) of Sec. 32. Sec. 42 of the Act would, therefore, be necessarily attracted in relation to an application under Section 34."

In coming to the conclusion, the learned Judge had followed the judgment of the Supreme Court in Kumbha Mawji's case.

22. The matter, however, does not end there. Before dealing with Mr. Pratap's submission I must mention that I decided this Notice of Motion on the basis that the Civil Miscellaneous Application No.101 of 2009 filed by the respondent before the District Judge, Jam Khambaliya for setting aside the award under section 34 of the Act is valid and maintainable. I cannot presume that this proceeding is invalid for any reason, including on the ground of jurisdiction. This Court cannot decide whether or not the Court in Jam Khambaliya has jurisdiction to hear the Civil Miscellaneous Application. The order of the Supreme Court relied upon by Mr.Pratap only stays and does not quash the proceedings. The matter is pending before the Supreme Court. All the questions pertaining to the maintainability and validity thereof must be decided by the Gujarat High Court and not by this Court. It is only on this basis that I agreed to hear the present Notice of Motion.

23. This brings me to Mr. Pratap's submission that in this case the provisions of section 42 do not apply. Section 42 falls within Part I of the Act. The above petition is filed under Part II of the Act.

24. Mr. Thakkar relied upon the judgment of the Supreme Court in Bhatia International v. Bulk Trading SA., (2002) 4 SCC 105 to contend that the provisions of Part-I would apply even to a foreign award which is dealt with under Part-II of the Act. Paragraphs 21 and 26 of the judgment read as under :-

"21. Now let us look at sub-sections (2), (3) and (4) of Section 2. Sub-section (2) of Section 2 provides that Part I would apply where the place of arbitration is in India. To be immediately noted, that it is not providing that Part I shall not apply where the place of arbitration is not in India. It is also not providing that Part I will "only" apply where the place of arbitration is in India (emphasis supplied). Thus the legislature has not provided that Part I is not to apply to arbitrations which take place outside India. . The use of the language is significant and important. The legislature is emphasising that the provisions of Part I would apply to arbitrations which take place in India, but not providing that the provisions of Part I will not apply to arbitrations which take place out of India. The wording of sub-section (2) of Section 2 suggests that the intention of the legislature was to make provisions of Part I compulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of Part I in such arbitrations. By omitting to provide that part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to ally (sic allow) parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied.

...................

26. Mr. Sen had also submitted that Part II, which deals with enforcement of foreign awards does not contain any provision similar to Section 9 or Section 17. As indicated earlier, Mr. Sen had submitted that this indicted the intention of the legislature not to apply Section 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate Chapter or Part. Part II deals with enforcement of foreign awards.Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of "foreign awards" which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded the provisions of Part I will also apply to "foreign awards". The opening words of Sections 45 and 54, which are in Part II read "notwithstanding anything contained in Part I". Such a non obstante clause had to be put in because the provisions of Part I apply to Part II.

Thus, the Supreme Court has held that although Part-I would also apply to international commercial arbitrations held out of India, the provisions of Part-I may get excluded by express or implied agreement of the parties. It is only if the provisions of Part-I are not so excluded that they will also apply to foreign awards.

25. Mr. Pratap submitted that in view of the present arbitration clause, the provisions of Part-I have been impliedly, if not expressly, excluded. I have already set out clause 28 which pertains to arbitration. Mr. Pratap submitted that it was agreed between the parties that English law would apply. In any event, he submitted that the provisions of the English Arbitration Act were to govern the arbitration proceedings.

26. I find Mr. Pratap's submission that the Arbitration Act (England), 1996 was applicable between the parties to be well founded. Firstly, the clause itself specifically provides "English Law to apply". Even assuming that this sentence in clause 28 does not refer to the substantive law, it certainly applies to the arbitration proceedings. There is no other explanation for this provision. A view to the contrary would render the stipulation in clause 28 "English Law to apply" redundant. In this view of the matter, Mr. Pratap's reliance upon the judgment of the Supreme Court in Videocon Industries Limited v. Union of India & Anr., (2011) 6 SCC 161 is well founded. It is important firstly to note clauses 33.1 and 34.12 which fell for consideration in that case. They read as under :-

"33.1 Indian law to govern.- Subject to the provisions of Article 34.12, this contract shall be governed and interpreted in accordance with the laws of India.

................

34.12 Venue and law of arbitration agreement.- The venue of sole expert, conciliation or arbitration proceedings pursuant to this article, unless the parties otherwise agree, shall be Kuala Lumpur, Malaysia and shall be conducted in the English language. Insofar as practicable, the parties shall continue to implement the terms of this contract notwithstanding the initiation of arbitral proceedings and any pending claim or dispute. Notwithstanding the provisions of Article 33.1, the arbitration agreement contained in this Article 34 shall be governed by the laws of England."

It is important to note that clause 33.1 provided that the agreement would be governed by and interpreted in accordance with the laws of India. However, clause 34.12 provided, inter-alia, that "Notwithstanding the provisions of Article 33.1, the arbitration agreement contained in the Article 34 shall be governed by the laws of England". The Supreme Court held that where parties agree that the arbitration agreement is governed by the laws of a foreign country, it necessarily implies that they agreed to exclude the provisions of Part I of the Act. The Supreme Court approved the judgment of a learned single Judge of the Gujarat High Court while considering similar clauses. In the Gujarat case it was held that in such a situation even the award cannot be challenged involving the provisions of the Act. The Supreme Court held :

"29. We may now advert to the judgment of the learned Single Judge of the Gujarat High Court in Hardy Oil & Gas v. Hindustan Oil Exploration Co. Ltd. The facts of that case were entered into between Unocal Bharat Ltd., Hardy Oil and Gas Ltd., Netherland B.V. (Hardy), Infrastructure Leasing and Financial Services Ltd., Housing Development Finance Corporation Ltd. and Hindustan Oil Exploration Company Ltd. on 14-10-1998. The agreement had an arbitration clause. A dispute having arisen between the parties, the matter was referred to the Arbitral Tribunal. During the pendency of the arbitration proceedings, an application was filed by the appellant in the District Court, Vadodara under Section 9 of the Act. A preliminary objection was raised to the maintainability of that petition. The learned District Judge accepted the objection.

30. The learned Single Judge of the Gujarat High Court referred to Clause 9.5 of the agreement, which was as under :

"9.5. Governing law and arbitration.- 1. This agreement [except for the provisions of Clause 9.5.4 (relating to arbitration)] shall be governed by and construed in accordance with the substantive laws of India.

2. Any dispute or difference of whatever nature arising under, out of, or in connection with this agreement, including any question regarding its existence, validity or termination, which the parties are unable to resolve between themselves within sixty (60) days of notification by one or more parties to the other (s) that a dispute exists for the purpose of this Clause 9 shall at the instance of any party be referred to and finally resolved by arbitration under the rules of the London Court of International Arbitration ('LCIA'), which Rules ('Rules') are deemed to be incorporated by the reference to this clause.

3. The tribunal shall consist of two arbitrators who shall be Queen's Counsel, practicing at the English Bar in the Commercial Division of the High Court, one to be selected by the parties invoking the arbitration clause acting unanimously and one to be selected by the other shareholders acting unanimously, and one umpire who shall also be a Queen's Counsel, practicing the English Bar in the Commercial Division of this High Court. If the parties are unable to agree on the identity of the umpire within 15 days from the day on which the matter is referred to arbitration, the umpire shall be chosen and appointed by LCIA. Notwithstanding Article 3.3 of the Rules, the parties agree that LCIA may appoint a British umpire. No arbitrator shall be a person or former employee or agent of, or consultant or counsel to, any party or any associated company or any party or in any way otherwise connected with any of the parties.

4. The place of arbitration shall be London and the language of arbitration shall be English. The law governing arbitration will be the English law.

5. Any decision or award of an Arbitral Tribunal shall be final and binding on the parties."

The learned Single Judge referred to various judgments of this Court including Bhatia International v. Bulk Trading S.A., Shreejee Traco (I) (P) Ltd. v. Paperline International Inc., NTPC v. Singer Co. and upheld the order of the learned District Judge by observing that in terms of Clause 9.5.4 of the agreement, the place of arbitration was London and the law governing arbitration was the English law.

31. The learned Single Judge of the Gujarat High Court in Hardy case referred to para 32 of the judgment in Bhatia International v. Bulk Trading S.A. and observed that once the parties had agreed to be governed by any law other than Indian law in cases of international commercial arbitration, then that law would prevail and the provisions of the Act cannot be invoked questioning the arbitration proceedings or the award. This is evident from para 11.3 of the judgment, w which is extracted below:

"11.3 However, Their Lordships observed in para 32 that in cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express of implied, exclude all or any of its provisions. In that case 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 would not apply. Thus, even as per the decision relied upon by the learned advocate for the appellant, if the parties have agreed to be governed by any law other than Indian law in cases of international commercial arbitration, same would prevail. In the case on hand, it is very clear even on plain reading of Clause 9.5.4 that the parties' intention was to be governed by English law in respect of arbitration. It is not possible to give a narrow meaning to this clause as suggested by learned Senior Advocate Mr. Thakore that it would apply only in case of dispute on arbitration agreement. It can be interpreted only to mean that in case of any dispute regarding arbitration, English law would apply. When the clause deals with the place and language of arbitration with a specific provision that the law governing arbitration will be the English law, such a narrow meaning cannot be given. No other view is possible in light of exception carved out of Clause 9.5.1 relating to arbitration. Term 'arbitration', in Clause 9.5.4 cannot be taken out to mean arbitration agreement. Entire arbitral proceedings have to be taken to be agreed to be governed by English law.

32. In our opinion, the learned Single Judge of the Gujarat High Court had rightly followed the conclusion recorded by the three-Judge Bench in Bhatia International v. Bulk Trading S.A. and held that the District Court, Vadodara did not have the jurisdiction to entertain the petition filed under Section 9 of the Act because the parties had agreed that the law governing the arbitration will be English law.

33. In the present case also, the parties had agreed that notwithstanding Article 33.1, the arbitration agreement contained in Article 34 shall be governed by laws of England. This necessarily implies that the parties had agreed to exclude the provisions of Part I of the Act. As a corollary to the above conclusion, we hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Section 9 of the Act and the mere fact that the appellant had earlier filed similar petitions was not sufficient to clothe that High Court with the jurisdiction to entertain the petition filed by the respondents."

27. Mr. Thakkar adopted the reasoning of the Division Bench of the Gujarat High Court dated 22nd September, 2010 in Letters Patent Appeal No.2469 of 2009. As stated earlier, the Supreme Court, by an order dated 8th February, 2011, has stayed the judgment and further proceedings before the District Court, Jam Khambaliya in Civil Miscellaneous Application No.101 of 2009. The parties are, therefore, not bound by the judgment at this stage.

28. Moreover, the Division Bench in paragraph 24 held that clause 28 relates to curial law and that the conduct of the arbitration would be governed by English law. In paragraph 25, the Division Bench observed that the sentence "English law to apply" only indicates that "English law is to apply to the conduct of arbitration proceedings.....". Having said that, the Division Bench in paragraph 26 observed that even if it is accepted that the arbitrator is to follow the procedure laid down in English law such procedural law comes to an end after the award is announced. The Division Bench, accordingly, held that clause 28 does not exclude the applicability of Part-I of the Act expressly or impliedly.

After this judgment, the Supreme Court delivered the judgment in Videocon Industries Limited v. Union of India which I have referred to earlier. The judgment of the Division Bench of the Gujarat High Court is contrary to this judgment. It is also pertinent to note that the Supreme Court approved the judgment of the learned single Judge of the Gujarat High Court in Hardy Oil & Gas Ltd. v. Hindustan Oil Exploration Company Ltd., (2006) 1 Gujarat Law Report, 658. The Division Bench of the Gujarat High Court noted the judgment in paragraph 7, but did not deal with the same thereafter. The reliance, therefore, upon the judgment of the Division Bench of the Gujarat High Court is of no assistance to the respondent.

29. There is an additional factor in clause 28 of the present case which indicates that the parties had agreed that the law governing the arbitration will be the English law. This is in view of the reference to an umpire in clause 28. The Arbitration Act, 1996, has no reference to an umpire, whereas section 21 of the English Arbitration Act of 1996 expressly provides for an umpire. Clause 28, therefore, obviously referred to the English Arbitration Act of 1996.

30. In the circumstances, the provisions of Part-I of the Act were impliedly excluded by the parties. Section 42, therefore, would not apply to the present case. There is no question of conflict of decisions. Indeed, the effect of a prior judgment of either court would have to be examined by the Court hearing the application before it, thereafter.

31. In this view of the matter, it is not necessary to consider Mr. Pratap's submission that the parties had also agreed that the substantive law of England would apply.

32. The Notice of Motion is, therefore, dismissed.

The arbitration petition shall be heard on merits.

Ordered accordingly.