Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 610 2015

[Arising out of SLP(C) NO. 36643 OF 2014]

Harmony Innovation Shipping Ltd. ... Appellant

Versus

Gupta Coal India Ltd. & Anr. ...Respondents

JUDGMENT

Dipak Misra, J.

The issue that has emanated for consideration in this

appeal is whether in the obtaining factual matrix, especially

regard being had to the nature of the arbitration clause, the

High Court is justified in setting aside the order passed by the

learned Additional District Judge, Ernakulam on 25.9.2014 in

I.A. No. 4345 of 2014 in O.P. (ARB) No. 802/2014 directing the

first respondent therein to furnish security for US$ 11,15,400 or

its equivalent (approximate) Indian Rupees 6,60,00,000/- or to

Signature Not Verified

Digitally signed by

show cause on or before 01.10.2014, and as an interim measure

Gulshan Kumar Arora
Date: 2015.03.10
16:31:31 IST
Reason:

conditionally attaching the cargo belonging to the first

 2

respondent herein, while dealing with an application moved

under Section 9 of the Arbitration and Conciliation Act, 1996 (for

brevity, the Act), on the foundation that Section 9 of the Act is

limited to the applications to arbitration that takes place in India

and has no applicability to arbitration which takes place outside

India in view of the pronouncement in Bharat Aluminium Co.

v. Kaiser Aluminium Technical Services Inc.1 inasmuch as

clause 5 of the contract which is the arbitration clause clearly

spells out that the contract is to be governed and construed

according to English law and if the dispute of the claim does not

exceed USD 50,000, the arbitration should be conducted in

accordance with small claims procedure of the London Maritime

Arbitration Association.

2. Regard being had to the lis in question, suffice it to state

that an agreement was entered into between the parties on

20.10.2010 in respect of 24 voyages of coal shipment belonging

to the appellant, the first respondent before the High Court, from

Indonesia to India. The respondent no. 1 herein, Gupta Coal

India Ltd., undertook only 15 voyages and that resulted in

disputes which ultimately stood referred to arbitration. Be it

noted, an addendum to contract was executed as regards the

1 (2012) 9 SCC 552
 3

remaining voyages on 3.4.2013 when disputes arose in respect

of the principal/main agreement. As the facts would undrape

arbitration proceedings were initiated and eventually an award

was passed.

3. After the award came into existence, the present appellant

filed an application under Section 9 before the District Court,

Ernakulam for its enforcement under Sections 9/47 and 49 of

the Act. As the factual narration would further uncurtain in

respect of the addendum to contract, when disputes arose

relating to the same, arbitration proceedings were initiated and

at that juncture, the appellant moved the learned 2 nd Additional

District Court, Ernakulam under Section 9 of the Act seeking

attachment of the cargos as an interim relief and the learned

Additional District Judge, as has been stated earlier, issued

conditional order of attachment.

4. The order passed by the learned Additional District Judge,

was assailed before the High Court in a Writ Petition, O.P.(C) No.

2612 of 2014 raising a singular contention that the impugned

order therein was absolutely without jurisdiction and hence,

unsustainable in law.

5. A counter affidavit was filed contending, inter alia, that the

 4

application before the learned Additional District Judge was

maintainable inasmuch as the contract between the parties was

entered into prior to the decision in Bharat Aluminium Co.

(supra) and, therefore, the principle laid down in the said

decision was not attracted to the facts of the case, and in fact, it

was governed by the principles stated in Bhatia International

v. Bulk Trading S.A2.

6. The High Court, after hearing the learned counsel for the

parties, referred to main agreement, Exhibit P-1, the addendum,

Exhibit P-2, and the arbitration clause in the main agreement

and considered the decisions in Bhatia International (supra)

and Venture Global Engg. v. Satyam Computer Services

Ltd.3, some decisions of the High Court, reproduced a passage

from Russell on Arbitration and eventually came to hold as

follows:

The contention that since Ext.P1 was entered into

before the judgment in Bharat Aluminium Co.s case
and therefore the principles laid down in the said
decision is not applicable to the facts of the case
cannot be countenanced. The law laid down by the
Supreme Court in Bharat Aluminium Co.s case is
declaratory in nature and, therefore, the first
respondent cannot be heard to say that he is not
bound by the same and that the said principle cannot
be applied to the case on hand. In the case of a

2 (2002) 4 SCC 105

3 (2008) 4 SCC 190
 5

declaration, it is supposed to have been the law always

and one cannot be heard to say that it has only
prospective effect. It is deemed to have been the law at
all times. If that be so, the petition before the court
below is not maintainable and is only to be dismissed.

7. At the very outset, it is necessary to clear the maze as

regards the understanding of the ratio in Bharat Aluminium

Co. (supra) by the High Court. In the said case, the Constitution

Bench has clearly ruled thus:

197. The judgment in Bhatia International was ren-

dered by this Court on 13-3-2002. Since then, the
aforesaid judgment has been followed by all the High
Courts as well as by this Court on numerous occa-
sions. In fact, the judgment in Venture Global Engg.
has been rendered on 10-1-2008 in terms of the ratio
of the decision in Bhatia International. Thus, in order to
do complete justice, we hereby order, that the law now
declared by this Court shall apply prospectively, to all
the arbitration agreements executed hereafter.

The aforesaid judgment by the Constitution Bench was

decided on September 6, 2012. In the instant case, the

arbitration agreement was executed prior to that date and the

addendum, as mentioned earlier, came into existence

afterwards. Therefore, there can be no scintilla of doubt that the

authority in Bharat Aluminium Co. case would not be

applicable for determination of the controversy in hand. In fact,

the pronouncement in Bhatia International (supra) would be

applicable to the facts of the present case inasmuch as there is

 6

nothing in the addendum to suggest any arbitration and, in fact,

it is controlled and governed by the conditions postulated in the

principal contract. We shall advert to this aspect slightly more

specifically at a later stage.

8. Keeping the aforesaid in view, it is necessary to keenly

understand the decision in Bhatia International (supra). In

the said case, the agreement entered into between the parties,

contained an arbitration clause which provided that arbitration

was to be as per Rules of International Chambers of Commerce

(for short, the ICC). The parties had agreed that the arbitration

was to be held in Paris, France. The first respondent filed an

application under Section 9 of the Act before the learned

Additional District Judge, Indore, M.P. with an interim prayer. A

plea was raised by the appellant that the Indore Court had no

jurisdiction and application was not maintainable. The said

stand was repelled by the learned Additional District Judge,

which found favour with the High Court. Before this Court, it

was urged on behalf of the appellant that Part I of the Act only

applies to arbitration where the place of arbitration is in India,

but if the place of arbitration is not in India, then Part II of the

Act would apply. On behalf of the respondent therein, it was

 7

urged that unless the parties, by their agreement either

expressly or impliedly exclude its provisions, Part I would also

apply to all international commercial arbitrations including

those that take place in India. The three-Judge Bench came to

hold thus:-

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 In-
dia the provisions of Part I would compulsorily apply
and parties are free to deviate only to the extent per-
mitted 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. [Emphasis supplied]

After the said conclusion was recorded, the stand of the

learned senior counsel for the appellant was put thus:-

Faced with this situation Mr Sen submits that, in this

case the parties had agreed that the arbitration be as
per the Rules of ICC. He submits that thus by neces-
sary implication Section 9 would not apply. In our
view, in such cases the question would be whether
Section 9 gets excluded by the ICC Rules of Arbitra-
tion. Article 23 of the ICC Rules reads as follows:-
Conservatory and interim measures
1. Unless the parties have otherwise agreed, as
soon as the file has been transmitted to it, the Arbi-
tral Tribunal may, at the request of a party, order
any interim or conservatory measure it deems ap-
propriate. The Arbitral Tribunal may make the
 8

granting of any such measure subject to appropri-

ate security being furnished by the requesting
party. Any such measure shall take the form of an
order, giving reasons, or of an award, as the Arbitral
Tribunal considers appropriate.
2. Before the file is transmitted to the Arbitral
Tribunal, and in appropriate circumstances even
thereafter, the parties may apply to any competent
judicial authority for interim or conservatory mea-
sures. The application of a party to a judicial au-
thority for such measures or for the implementation
of any such measures ordered by an Arbitral Tri-
bunal shall not be deemed to be an infringement or
a waiver of the arbitration agreement and shall not
affect the relevant powers reserved to the Arbitral
Tribunal. Any such application and any measures
taken by the judicial authority must be notified
without delay to the Secretariat. The Secretariat
shall inform the Arbitral Tribunal thereof.

After so stating, the Court referred to Article 23 of the ICC

Rules and interpreted thus:-

Thus Article 23 of the ICC Rules permits parties to

apply to a competent judicial authority for interim and
conservatory measures. Therefore, in such cases an
application can be made under Section 9 of the said
Act.

9. The decision in Bhatia International (supra) was followed

in Venture Global Engg. (supra). The Court scanned the

ultimate conclusion recorded in Bhatia International (supra)

and in that context, referred to various paragraphs and came to

hold as follows:-
 9

32. The learned Senior Counsel for the respondent

based on para 26 submitted that in the case of foreign
award which was passed outside India is not enforce-
able in India by invoking the provisions of the Act or
CPC. However, after critical analysis of para 26, we are
unable to accept the argument of the learned Senior
Counsel for the respondent. Paras 26 and 27 start by
dealing with the arguments of Mr Sen who argued that
Part I is not applicable to foreign awards. It is only in
the sentence starting at the bottom of para 26 that the
phrase it must immediately be clarified that the find-
ing of the Court is rendered. That finding is to the ef-
fect that an express or implied agreement of parties
can exclude the applicability of Part I. The finding
specifically states: But if not so excluded, the provi-
sions of Part I will also apply to all foreign awards.
This exception which is carved out, based on agree-
ment of the parties, in para 21 (placita e to f) is ex-
tracted below: (Bhatia International case SCC p. 119e
to f)

21. 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 com-
mercial 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.

33. The very fact that the judgment holds that it would
be open to the parties to exclude the application of the
provisions of Part I by express or implied agreement,
would mean that otherwise the whole of Part I would
apply. In any event, to apply Section 34 to foreign in-
ternational awards would not be inconsistent with
 10

Section 48 of the Act, or any other provision of Part II

as a situation may arise, where, even in respect of
properties situate in India and where an award would
be invalid if opposed to the public policy of India,
merely because the judgment-debtor resides abroad,
the award can be enforced against properties in India
through personal compliance of the judgment-debtor
and by holding out the threat of contempt as is being
sought to be done in the present case. In such an
event, the judgment-debtor cannot be deprived of his
right under Section 34 to invoke the public policy of
India, to set aside the award. As observed earlier, the
public policy of India includes (a) the fundamental
policy of India; or (b) the interests of India; or (c) jus-
tice or morality; or (d) in addition, if it is patently ille-
gal. This extended definition of public policy can be by-
passed by taking the award to a foreign country for en-
forcement.

After so holding the Court dealt with the contentions of the

learned senior counsel who highlighted the concept of transfer

of shares and the procedure involved therein under the Indian

Companies Act, 1956 and the impact of Foreign Exchange Man-

agement Act, 1999 and adverted to the impact and effect of the

legal and regulatory scrutiny under both the Act and accepted

the submission. The Court, thereafter, scanned the

shareholders agreement and eventually came to hold that in

terms of the decision in Bhatia International (supra) , Part I of

the Act is applicable to the award that was called in question in

the said case, even though it was a foreign award.

10. The aforesaid decision clearly lays down that it would be

 11

open to the parties to exclude the application of the provision of

Part I by express or implied agreement. Unless there is express

or implied exclusion, the whole of Part I would apply. The Court,

as stated earlier, was dealing with shareholders agreement

between the parties. Sections 11.05 (b) and (c) of the

shareholders agreement between the parties read as follows:-

(b) This agreement shall be construed in accordance

with and governed by the laws of the State of Michi-
gan, United States, without regard to the conflicts of
law rules of such jurisdiction. Disputes between the
parties that cannot be resolved via negotiations shall
be submitted for final, binding arbitration to the Lon-
don Court of Arbitration.

(c) Notwithstanding anything to the contrary in this

agreement, the shareholders shall at all times act in
accordance with the Companies Act and other applica-
ble Acts/rules being in force, in India at any time.

The said clauses were interpreted by the Court not to

exclude either expressly or impliedly the applicability of Part I of

the Act.

11. In this context, it will be useful to refer to the decision in

Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. 4

wherein the designated Judge was called to decide the issue of

appointment of sole arbitrator. The arbitration clause read as

follows:-

4 (2008) 10 SCC 308

 12

13. Settlement of disputes

13.1. This agreement, its construction, validity and
performance shall be governed by and constructed in
accordance with the laws of England and Wales;
13.2. Subject to Clause 13.3 all disputes or differ-
ences arising out of, or in connection with, this agree-
ment which cannot be settled amicably by the parties
shall be referred to adjudication;
13.3. If any dispute or difference under this agree-
ment touches or concerns any dispute or difference
under either of the sub-contract agreements, then the
parties agree that such dispute or difference hereun-
der will be referred to the adjudicator or the courts as
the case may be appointed to decide the dispute or dif-
ference under the relevant sub-contract agreement
and the parties hereto agree to abide by such decision
as if it were a decision under this agreement.

The Court referred to the decision in Bhatia International

(supra) and Lesotho Highlands Development Authority v.

Impregilo SpA5 and came to hold 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 ar-
bitration agreement, the law governing the said agree-
ment would ordinarily be the same as the law govern-
ing the contract itself. The decisions cited by Mr Tri-
pathi and the views of the jurists referred to in NTPC
v. Singer Co.6 case 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 proposi-
tion that notwithstanding the provisions of Section
2(2) of the Arbitration and Conciliation Act, 1996, indi-
cating that Part I of the said Act would apply where
the place of arbitration is in India, even in respect of
5 (2005) 3 WLR 129
6 (1992) 3 SCC 551
 13

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 maintain-
able.

12. Mr. Vishwanathan, learned senior counsel, apart from

citing aforesaid authorities, have also drawn inspiration from

Citation Infowares Ltd. v. Equinox Corp.7 wherein the

designated Judge held that unless the provisions of Part I of the

Act are excluded by agreement between the parties either

expressly or by implication, Part I of the Act including Section 11

would be applicable even where the international commercial

agreements are governed by the laws of another country. It may

be that the arbitrator might be required to take into account the

applicable laws which may be the foreign laws but that does not

affect the jurisdiction under Section 11 which falls in Part I

which has been specifically held applicable in Bhatia

International case.

13. Referring to the arbitration clause, submits learned senior

counsel that there is no express or implied exclusion of the

applicability of Part I of the Act and, therefore, the Courts in

India have jurisdiction and the learned Additional District Judge

7 (2009) 7 SCC 220

 14

had not flawed in exercise of jurisdiction.

14. Mr. Giri, learned senior counsel appearing for the

respondents would submit that when the juridical seat is in

London, Part I of the Act would not be applicable. To bolster the

aforesaid submission, he has placed reliance on Reliance

Industries Limited and Another v. Union of India 8. It is also

urged by Mr. Giri, learned senior counsel that after the principal

agreement, an addendum was executed between the parties after

pronouncement of the decision in Bharat Aluminium Co. case

and, therefore, the principles laid down in Bhatia

International (supra) would not be applicable.

15. It is seemly to exposit the controversy and to appreciate

what has been laid down in the case of Reliance Industries

Limited (supra). The appellant in the said case has assailed the

judgment of the High Court of Delhi whereby the High Court had

allowed the petition filed by the respondent under Section 34 of

the Act, challenging the final partial award, whereby the

objections raised by the Union of India relating to the

arbitrability of the claims made by the petitioner therein in

respect of royalties, cess, service tax and CAG audit were

rejected. The Court referred to various agreements entered into

8 (2014) 7 SCC 603
 15

between the parties. It reproduced Articles 32 and 33 which was

entered into between the parties. The relevant clause for the

present purpose is 33.12. We think it appropriate to reproduce

the relevant part of the said clause.

33. Sole expert, conciliation and arbitration:

33.12. The venue of conciliation or arbitration pro-

ceedings pursuant to this article, unless the parties
otherwise agree, shall be London, England and shall
be conducted in the English language. The arbitration
agreement contained in this Article 33 shall be gov-
erned by the laws of England. 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.

16. As per Article 33.12, the arbitral proceedings were to be

held in London as the neutral venue. The venue of the arbitral

proceeding was shifted to Paris and again re-shifted to London.

Consequently, the parties agreed for amendment of the

agreement, which is relevant for the purpose of understanding

the principle, ultimately stated in the said authority:-

4. Applicable law and arbitration Except the

change of venue/seat of arbitration from London to
Paris, Articles 32 and 33 of the contract shall be
deemed to be set out in full n this agreement mutatis
mutandis and so that references therein to the
contract shall be references to this agreement.

17. As issues arose, the Arbitral Tribunal was constituted

under Article 33.12, the venue of arbitration was in London. A

 16

substantial hearing was held in Singapore. Thereafter, by

agreement of the parties, the Arbitral Tribunal made a final

partial consent award which was as follows:-

3. Final partial award as to seat

3.1. Upon the agreement of the parties, each
represented by duly authorised representatives and
through counsel, the Tribunal hereby finds, orders
and awards:

(a) That without prejudice to the right of the parties

to subsequently agree otherwise in writing, the
juridical seat (or legal place) of arbitration for the
purposes of the arbitration initiated under the
claimants notice of arbitration dated 16-12-2010
shall be London, England.
(b) That any hearings in this arbitration may take
place in Paris, France, Singapore or any other
location the Tribunal considers may be convenient.
(c) That, save as set out above, the terms and
conditions of the arbitration agreements in Article
33 of the PSCs shall remain in full force and effect
and be applicable in this arbitration.

18. The respondent, Union of India, had invoked the

jurisdiction of the Delhi High Court by stating that the terms of

the PSCs entered would manifest an unmistakable intention of

the parties to be governed by the laws of India and more

particularly the Arbitration Act, 1996; that the contracts were

signed and executed in India; that the subject-matter of the

contracts, namely, the Panna Mukta and the Tapti fields are

situated within India; that the obligations under the contracts

 17

had been for the past more than 15 years performed within

India; that the contracts stipulate that they shall be governed

and interpreted in accordance with the laws of India; that they

also provided that nothing in this contract shall entitle either

of the parties to exercise the rights, privileges and powers

conferred upon them by the contract in a manner which will

contravene the laws of India (Article 32.2); and that the

contracts further stipulate that the companies and the

operations under this contract shall be subject to all fiscal

legislation of India (Article 15.1).

19. On behalf of the appellant, the issue of maintainability was

raised. The High Court answered the issue in the following

manner:

Upon consideration of the entire matter, the High

Court has held that undoubtedly the governing law of
the contract i.e. proper law of the contract is the law of
India. Therefore, the parties never intended to
altogether exclude the laws of India, so far as
contractual rights are concerned. The laws of England
are limited in their applicability in relation to
arbitration agreement contained in Article 33. This
would mean that the English law would be applicable
only with regard to the curial law matters i.e. conduct
of the arbitral proceedings. For all other matters,
proper law of the contract would be applicable. Relying
on Article 15(1), it has been held that the fiscal laws of
India cannot be derogated from. Therefore, the
exclusion of Indian public policy was not envisaged by
the parties at the time when they entered into the
 18

contract. The High Court further held that to hold that

the agreement contained in Article 33 would envisage
the matters other than procedure of arbitration
proceedings would be to rewrite the contract. The High
Court also held that the question of arbitrability of the
claim or dispute cannot be examined solely on the
touchstone of the applicability of the law relating to
arbitration of any country but applying the public
policy under the laws of the country to which the
parties have subjected the contract to be governed.
Therefore, according to the High Court, the question of
arbitrability of the dispute is not a pure question of
applicable law of arbitration or lex arbitri but a larger
one governing the public policy.

20. Addressing the issue of maintainability, this Court referred

to the decision in Bhatia International (supra) and took note of

the fact that parties have agreed and as is also perceivable from

the final partial consent award that the juridical seat or local

place of arbitration for the purpose of arbitration initiated under

the claimants notice shall be London, England. The parties

have also agreed that the hearing of the notice for arbitration

may take place at Paris, France, Singapore or any other location

the Tribunal considers may be convenient. The Court posed the

question whether in the factual matrix, there has been express

or implied exclusion of the applicability of Part I of the Act. In

that context, the Court referred to paragraph 32 of Bhatia

International case and, thereafter, analysed the relevant

articles of the PSC to discover the real intention of the parties as

 19

to whether the provisions of the Act had been excluded. The

Court referred to Articles 32.1 and 32.2 that dealt with the

applicable law and language of the contract. Article 32.1

provided that the proper law of the contract would be law of

India and under Article 32.2 made a declaration none of the

provisions contained in the contract would entitle either the

Government or the contractor to exercise the rights, privileges

and powers conferred upon it by the contract in a manner which

would contravene the laws of India. The Court observed that the

basis of controversy involved in the case pertain to analysis of

the anatomy of the Article 33.12 which provided that venue of

the arbitration shall be London and that the arbitration

agreement shall be governed by the laws of England. That apart,

the parties had agreed that juridical seat or legal place of

arbitration for the purpose initiated under the claimants notice

of arbitration would be at London. The Court posed the

question whether such stipulations excluded the applicability of

the Act or not. The Court repelling the contention that clauses

do not exclude the applicability of the 1996 Act, observed thus:-

In our opinion, the expression laws of India as used

in Articles 32.1 and 32.2 has a reference only to the
contractual obligations to be performed by the parties
under the substantive contract i.e. PSC. In other
 20

words, the provisions contained in Article 33.12 are

not governed by the provisions contained in Article
32.1. It must be emphasised that Article 32.1 has been
made subject to the provision of Article 33.12. Article
33.12 specifically provides that the arbitration
agreement shall be governed by the laws of England.
The two articles are particular in laying down that the
contractual obligations with regard to the exploration
of oil and gas under the PSC shall be governed and
interpreted in accordance with the laws of India. In
contradistinction, Article 33.12 specifically provides
that the arbitration agreement contained in Article
33.12 shall be governed by the laws of England.
Therefore, in our opinion, the conclusion is
inescapable that applicability of the Arbitration Act,
1996 has been ruled out by a conscious decision and
agreement of the parties. Applying the ratio of law as
laid down in Bhatia International it would lead to the
conclusion that the Delhi High Court had no
jurisdiction to entertain the petition under Section 34
of the Arbitration Act, 1996.

21. After so stating, the Court opined that it is too late in the

day to contend that the seat of arbitration is not analogous to an

exclusive jurisdiction clause. Once the parties had consciously

agreed that juridical seat of the arbitration would be London and

that the agreement would be governed by the laws of London, it

was no longer open to contend that provisions of Part I of the Act

would also be applicable to the arbitration agreement. The

Court referred to the decision in Videocon Industries Ltd. v.

Union of India9. Referring to clause in the Videocon

Industries Ltd. (supra), the Court proceeded to state that:-

9 (2011) 6 SCC 161
 21

47. .The first issue raised in Videocon Industries Ltd.

was as to whether the seat of arbitration was London
or Kuala Lumpur. The second issue was with regard
to the courts that would have supervisory jurisdiction
over the arbitration proceedings. Firstly, the plea of
Videocon Industries Ltd. was that the seat could not
have been changed from Kuala Lumpur to London
only on agreement of the parties without there being a
corresponding amendment in the PSC. This plea was
accepted. It was held that seat of arbitration cannot
be changed by mere agreement of parties. In para 21
of the judgment, it was observed as follows: (SCC p.
170)

21. Though, it may appear repetitive, we deem it

necessary to mention that as per the terms of
agreement, the seat of arbitration was Kuala
Lumpur. If the parties wanted to amend Article
34.12, they could have done so only by a written
instrument which was required to be signed by all
of them. Admittedly, neither was there any
agreement between the parties to the PSC to shift
the juridical seat of arbitration from Kuala Lumpur
to London nor was any written instrument signed
by them for amending Article 34.12. Therefore, the
mere fact that the parties to the particular
arbitration had agreed for shifting of the seat of
arbitration to London cannot be interpreted as
anything except physical change of the venue of
arbitration from Kuala Lumpur to London.

48. The other issue considered by this Court in

Videocon Industries Ltd. was as to whether a petition
under Section 9 of the Arbitration Act, 1996 would be
maintainable in the Delhi High Court, the parties
having specifically agreed that the arbitration
agreement would be governed by the English law. This
issue was decided against the Union of India and it
was held that the Delhi High Court did not have the
jurisdiction to entertain the petition filed by the Union
of India under Section 9 of the Arbitration Act.
 22

22. While discussing about the ratio laid down in Videocon

Industries Ltd. (supra), the Court analysed the agreement of

the earlier case, and mainly the relevant parts of Articles 33, 34

and 35. Article 34.12 in Videocon Industries Ltd. case read as

follows:

34.12. Venue and law of arbitration agreement.The

venue of sole expert, conciliation or arbitration pro-
ceedings pursuant to this article, unless the parties
otherwise agree, shall be Kuala Lumpur, Malaysia,
and shall be conducted in the English language. Inso-
far as practicable, the parties shall continue to imple-
ment the terms of this contract notwithstanding the
initiation of arbitral proceedings and any pending
claim or dispute. Notwithstanding the provisions of Ar-
ticle 33.1, the arbitration agreement contained in this
Article 34 shall be governed by the laws of England.

Clause 35.2 of the agreement pertaining to amendment

stipulated that the said contract shall not be amended modified,

varied or supplemented in any respect except by an instrument

in writing signed by all the parties, which shall state the date

upon which the amendment or modification shall be effective.

Thereafter, the Court had proceeded to state what we have

reproduced hereinbefore.

23. In Reliance Industries Ltd. (supra), the Court took note of

the fact that parties had made necessary amendment in the

PSCs to provide that the juridical seat of arbitration shall be

 23

London and the arbitration agreement will be governed by the

laws of England and in that context observed that the ratio laid

down in Videocon Industries Ltd. (supra) would be relevant

and binding. Proceeding further, the Court stated thus:

The arbitration agreement in this appeal is identical

to the arbitration agreement in Videocon Industries. In
fact, the factual situation in the present appeal is on a
stronger footing than in Videocon Industries Ltd. As no-
ticed earlier, in Videocon Industries, this Court con-
cluded that the parties could not have altered the seat
of arbitration without making the necessary amend-
ment to the PSC. In the present appeal, necessary
amendment has been made in the PSC. Based on the
aforesaid amendment, the Arbitral Tribunal has ren-
dered the final partial consent award of 14-9-2011
recording that the juridical seat (or legal place) of the
arbitration for the purposes of arbitration initiated un-
der the claimants notice of arbitration dated
16-12-2010 shall be London, England. Furthermore,
the judgment in Videocon Industries is subsequent to
Venture Global. We are, therefore, bound by the ratio
laid down in Videocon Industries Ltd.

24. The Court also referred to Bharat Aluminium Co. (supra),

especially para 123, which is as follows:

123. an agreement as to the seat of an arbitration

is analogous to an exclusive jurisdiction clause. Any
claim for a remedy as to the validity of an existing in-
terim or final award is agreed to be made only in the
courts of the place designated as the seat of arbitra-
tion.
[emphasis in original]

25. The two-Judge Bench referred to Dozco India Private Ltd.

 24

v. Doosan Infracore Company Ltd.10, Sumitomo Heavy

Industries Ltd. v. ONGC Ltd.11, Yograj Infrastructure Ltd. v.

Ssang Yong Engg. and Construction Co. Ltd.12 and quoted a

paragraph from C v. D13, which was approved in Bharat

Aluminium Co. (supra) and reiterated in Enercon (India) Ltd.

v. Enercon GmbH14 and further quoted a paragraph from the

said authority which we think condign to be reproduced:-

this follows from the express terms of the Arbitration

Act, 1996 and, in particular, the provisions of Section
2 which provide that Part I of the Arbitration Act, 1996
applies where the seat of the arbitration is in England
and Wales or Northern Ireland. This immediately es-
tablishes a strong connection between the arbitration
agreement itself and the law of England. It is for this
reason that recent authorities have laid stress upon
the locations of the seat of the arbitration as an impor-
tant factor in determining the proper law of the arbi-
tration agreement.

Thereafter, the two-Judge Bench held thus:-

In our opinion, these observations in Sulamerica Cia

Nacional de Seguros SA v. Enesa Engelharia SA --
Enesa15 are fully applicable to the facts and circum-
stances of this case. The conclusion reached by the
High Court would lead to the chaotic situation where
the parties would be left rushing between India and
England for redressal of their grievances. The provi-
sions of Part I of the Arbitration Act, 1996 (Indian) are
necessarily excluded; being wholly inconsistent with

10 (2011) 6 SCC 179

11 (1998) 1 SCC 305
12 (2011) 9 SCC 735
13 2008 Bus LR 843
14 (2014) 5 SCC 1
15 (2013) 1 WLR 102
 25

the arbitration agreement which provides that arbi-

tration agreement shall be governed by English law.
Thus the remedy for the respondent to challenge any
award rendered in the arbitration proceedings would
lie under the relevant provisions contained in the Arbi-
tration Act, 1996 of England and Wales. Whether or
not such an application would now be entertained by
the courts in England is not for us to examine, it
would have to be examined by the court of competent
jurisdiction in England.

26. Elaborating the said facet, the Court discussed the

principle that has been stated in Bhatia International (supra)

laying that 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. Elaborating further,

it proceeded to lay down thus:

In this case, the parties have by agreement provided

that the juridical seat of arbitration will be in London.
On the basis of the aforesaid agreement, necessary
amendment has been made in the PSCs. On the basis
of the agreement and the consent of the parties, the
Arbitral Tribunal has made the final partial consent
award on 14-9-2011 fixing the juridical seat (or legal
place) of arbitration for the purposes of arbitration ini-
tiated under the claimants notice of arbitration dated
16-12-2010 in London, England. To make it even fur-
ther clear that the award also records that any hearing
in the arbitration may take place in Paris, France, Sin-
gapore or any other location the Tribunal considers
 26

convenient. Article 33.12 stipulates that arbitration

proceedings shall be conducted in English language.
The arbitration agreement contained in Article 33 shall
be governed by the laws of England. A combined effect
of all these factors would clearly show that the parties
have by express agreement excluded the applicability
of Part I of the Arbitration Act, 1996 (Indian) to the ar-
bitration proceedings.

27. On a further analysis of the said decision, we notice that

the Court repelled the submission that irrespective of the

provisions contained in Article 33.12, the Act would be

applicable to arbitration proceeding and the English law would

be applicable only in relation to the conduct of the arbitration up

to the passing of the partial final award, as in the said case, it

was the partial final award was in question. In justification in

repelling such a submission, the Court opined thus:

69. ...... As noticed earlier, Article 32.1 itself provides

that it shall be subject to the provision of Article
33.12. Article 33.12 provides that the arbitration
agreement contained in this article shall be governed
by the laws of England. The term laws of England
cannot be given a restricted meaning confined to only
curial law. It is permissible under law for the parties to
provide for different laws of the contract and the arbi-
tration agreement and the curial law. In Naviera Ama-
zonica Peruana SA v. Compania Internacional De Se-
guros Del Peru16, the Court of Appeal in England con-
sidered an agreement which contained a clause pro-
viding for the jurisdiction of the courts in Lima, Peru
in the event of judicial dispute and at the same time
contained a clause providing that the arbitration
would be governed by the English law and the proce-
16 (1988) 1 Lloyds Rep 116 (CA)
 27

dural law of arbitration shall be the English law. The

Court of Appeal observed as follows:

All contracts which provide for arbitration and

contain a foreign element may involve three poten-
tially 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).

70. From the above, it is evident that it was open to

the parties to agree that the law governing the sub-
stantive contract (PSC) would be different from the law
governing the arbitration agreement. This is precisely
the situation in the present case. Article 32.1 specifi-
cally provides that the performance of the contractual
obligations under the PSC would be governed and in-
terpreted under the laws of India. So far as the alter-
native dispute redressal agreement i.e. the arbitration
agreement is concerned, it would be governed by the
laws of England. There is no basis on which the re-
spondents can be heard to say that the applicability of
laws of England related only to the conduct of arbitra-
tion reference. The law governing the conduct of the
arbitration is interchangeably referred to as the curial
law or procedural law or the lex fori. The delineation of
the three operative laws as given in Naviera Amazonica
has been specifically followed by this Court in Sumit-
omo. The Court also, upon a survey, of a number of
decisions rendered by the English courts and after re-
ferring to the views expressed by learned commenta-
tors on international commercial arbitration con-
cluded that:

16. The law which would apply to the filing of the

award, to its enforcement and to its setting aside
 28

would be the law governing the agreement to arbi-

trate and the performance of that agreement.

28. After so holding, the Court referred to the legal position

stated in Dozcos case wherein it has been ruled thus:

In the backdrop of these conflicting claims, the ques-

tion boils down to as to what is the true interpretation
of Article 23. This Article 23 will have to be read in the
backdrop of Article 22 and more particularly, Article
22.1. It is clear from the language of Article 22.1 that
the whole agreement would be governed by and con-
strued in accordance with the laws of The Republic of
Korea. It is for this reason that the respondent heavily
relied on the law laid down in Sumitomo Heavy Indus-
tries Ltd. v. ONGC Ltd. This judgment is a complete au-
thority on the proposition that the arbitrability of the
dispute is to be determined in terms of the law govern-
ing arbitration agreement and the arbitration proceed-
ings have to be conducted in accordance with the cu-
rial law. This Court, in that judgment, relying on
Mustill and Boyd: The Law and Practice of Commercial
Arbitration in England, 2nd Edn., observed in para 15
that where the law governing the conduct of the refer-
ence is different from the law governing the underlying
arbitration agreement, the court looks to the arbitra-
tion 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. In para 16, this
Court, in no uncertain terms, declared that the law
which would apply to the filing of the award, to its en-
forcement and to its setting aside would be the law
governing the agreement to arbitrate and the perfor-
mance of that agreement.

The said view was accepted by the two-Judge Bench.

29. Eventually, the Court dislodged the decision of the High

Court of Delhi stating that:

 29

76.2. We further overrule and set aside the conclu-

sion of the High Court that, even though the arbitra-
tion agreement would be governed by the laws of Eng-
land and that the juridical seat of arbitration would be
in London, Part I of the Arbitration Act would still be
applicable as the laws governing the substantive con-
tract are Indian laws.

76.3. In the event a final award is made against the re-

spondent, the enforceability of the same in India can
be resisted on the ground of public policy.

76.4. The conclusion of the High Court that in the

event, the award is sought to be enforced outside In-
dia, it would leave the Indian party remediless is with-
out any basis as the parties have consensually pro-
vided that the arbitration agreement will be governed
by the English law. Therefore, the remedy against the
award will have to be sought in England, where the ju-
ridical seat is located. However, we accept the submis-
sion of the appellant that since the substantive law
governing the contract is Indian law, even the courts
in England, in case the arbitrability is challenged, will
have to decide the issue by applying Indian law viz.
the principle of public policy, etc. as it prevails in In-
dian law.

30. We have dealt with the said decision as it has taken note of

all the pronouncements in the field and further, Mr. Giri,

learned senior counsel appearing for the respondents would

heavily rely on it and Mr. Viwanathan, learned senior counsel

would leave no stone unturned to distinguish the same on the

factual foundation especially in reference to the arbitration

clause.

31. At this juncture, it is profitable to note that in Reliance

 30

Industries Ltd. (supra), the authority in Venture Global Engg.

(supra) has been distinguished by taking note of the various

clauses in the agreement and opined that as there was a non

obstante clause in the agreement hence, the claim of the

appellant therein can be enforced in India.

32. In view of the aforesaid propositions laid down by this

Court, we are required to scan the tenor of the clauses in the

agreement specifically, the arbitration clause in appropriate

perspective. The said clause read as follows:

5. If any dispute or difference should arise under

this charter, general average/arbitration in London to
apply, one to be appointed by each of the parties
hereto, the third by the two so chosen, and their
decision or that of any two of them, shall be final and
binding, and this agreement may, for enforcing the
same, be made a rule of Court. Said three parties to be
commercial men who are the members of the London
Arbitrators Association. This contract is to be
governed and construed according to English Law.
For disputes where total amount claim by either party
does not exceed USD 50,000 the arbitration should be
conducted in accordance with small claims procedure
of the London Maritime Arbitration Association.

33. Two aspects emerge for consideration: (i) Whether on the

basis of construction placed on the said clause in the agreement

it can be stated that the ratio laid down in Bhatia

International (supra) would not be attracted, but what has

been laid down in Reliance Industries Ltd. (supra) would be

 31

applicable and (ii) whether the execution of the addendum would

attract the principles laid down in Bharat Aluminium Co. case

and oust the jurisdiction of the Indian courts.

34. First, we shall advert to the first proposition. There is no

cavil over the principle stated in Bhatia International (supra)

that Part I of the Act is applicable to arbitrations held outside

India unless the parties have either expressly or impliedly

excluded the provisions of the Act. Mr. Vishwanathan, learned

senior counsel has submitted in the case at hand there is no

express exclusion, for clause remotely does not suggest so. For

the said purpose, he has commended us to the decisions in

A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem 17

and Rajasthan SEB v. Universal Petrol Chemicals Ltd.18 It is

also urged by him that the stipulation in the agreement does not

even remotely impliedly exclude the jurisdiction of the Indian

courts. He would submit that to apply the principle of implied

exclusion, the Court has to test the presumed intention and in

such a situation, it is the duty of the Court to adopt an objective

approach, that is to say, what would have been the intention of

reasonable parties in the position of the actual parties to the

17 (1989) 2 SCC 163

18 (2009) 3 SCC 107
 32

contract. Learned senior counsel would also contend that the

concept of fair result has to be kept in view while construing a

contract. To buttress the aforesaid submissions, he has drawn

inspiration from Kim Lewisons The Interpretation of

Contracts, pages 26, 41, 110 and 217 wherein various

judgments have been referred.

35. The issue has to be tested, as we perceive, on the

parameters of law laid down in the cases of Videocon

Industries Ltd. (supra), Dozco (supra) and Reliance

Industries Ltd. (supra).

36. In Videocon Industries Ltd. (supra), the Court has

referred to Section 3 of the English Arbitration Act, 1996, which

reads as follows:

3. The seat of the arbitration.In this Part the

seat of the arbitration means the juridical seat of the
arbitration designated

(a) by the parties to the arbitration agreement, or

(b) by any arbitral or other institution or person vested

by the parties with powers in that regard, or

(c) by the Arbitral Tribunal if so authorised by the par-

ties, or determined, in the absence of any such desig-
nation, having regard to the parties agreement and all
the relevant circumstances.

Analysing the said provision, the Court proceeded to state

 33

as follows:

A reading of the above reproduced provision shows

that under the English law the seat of arbitration
means juridical seat of arbitration, which can be des-
ignated by the parties to the arbitration agreement or
by any arbitral or other institution or person empow-
ered by the parties to do so or by the Arbitral Tribunal,
if so authorised by the parties. In contrast, there is no
provision in the Act under which the Arbitral Tribunal
could change the juridical seat of arbitration which, as
per the agreement of the parties, was Kuala Lumpur.
Therefore, mere change in the physical venue of the
hearing from Kuala Lumpur to Amsterdam and Lon-
don did not amount to change in the juridical seat of
arbitration.

Eventually, the Court in the said case has ruled thus:

In the present case also, the parties had agreed that

notwithstanding Article 33.1, the arbitration agree-
ment 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 appel-
lant had earlier filed similar petitions was not suffi-
cient to clothe that High Court with the jurisdiction to
entertain the petition filed by the respondents.

37. In Dozco (supra), the Court referred to Article 22 and

Article 23 of the agreement, which dealt with the governing laws

and arbitration. Article 22.1 in the said case provided that the

agreement shall be governed by and construed in accordance

with the laws of the Republic of Korea. Article 23.1, which dealt
 34

with arbitration, stipulated that all disputes arising in

connection with the 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 I.C.C. The Court referred to the decisions in Bhatia

International (supra), Indtel Technical Services (supra),

Citation Infowares Ltd. (supra), NTPC v. Singer Co.19 and

while analysing the import of Clause 23.1, the Court placed

heavy reliance on Naviera Amazonica Peruana SA (supra) and

held thus:

19. In respect of the bracketed portion in Article 23.1,

however, it is to be seen that it was observed in
Naviera case:
It seems clear that the submissions advanced
below confused the legal seat, etc. of an arbitration
with the geographically convenient place or places
for holding hearings. This distinction is nowadays a
common feature of international arbitrations and is
helpfully explained in Redfern and Hunter in the fol-
lowing passage under the heading The Place of Ar-
bitration:

The preceding discussion has been on the basis

that there is only one place of arbitration. This
will be the place chosen by or on behalf of the
parties; and it will be designated in the arbitra-
tion agreement or the terms of reference or the
minutes of proceedings or in some other way as
the place or seat of the arbitration. This does
not mean, however, that the Arbitral Tribunal
must hold all its meetings or hearings at the
19 (1992) 3 SCC 551
 35

place of arbitration. International commercial

arbitration often involves people of many differ-
ent nationalities, from many different countries.
In these circumstances, it is by no means un-
usual for an Arbitral Tribunal to hold meetings
or even hearings in a place other than the
designated place of arbitration, either for its
own convenience or for the convenience of the
parties or their witnesses.

It may be more convenient for an Arbitral Tri-

bunal sitting in one country to conduct a hear-
ing in another country for instance, for the
purpose of taking evidence. In such circum-
stances, each move of the Arbitral Tribunal does
not of itself mean that the seat of the arbitration
changes. The seat of the arbitration remains the
place initially agreed by or on behalf of the par-
ties.
These aspects need to be borne in mind when one
comes to the Judges construction of this policy.
It would be clear from this that the bracketed portion
in the article was not for deciding upon the seat of the
arbitration, but for the convenience of the parties in
case they find to hold the arbitration proceedings
somewhere else than Seoul, Korea. The part which has
been quoted above from Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del Peru
supports this inference.

20. 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. and Indtel Technical Services (P) Ltd. v.
 36

W.S. Atkins Rail Ltd., as also in Citation Infowares Ltd.

v. Equinox Corpn. 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.

38. In Yograj Infrastructure Ltd. (supra), two-Judge Bench

dealt with the concept of procedural law and curial law. In

that context, it referred to the agreement in the contract,

namely, Clauses 27 and 28. In that context the Court opined

that:

..... 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 ar-
bitration clause as to which law would apply in re-
spect 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 it-
self. 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 indi-
 37

cates that the arbitration proceedings are to be con-

ducted in accordance with the SIAC Rules.
[Emphasis supplied]

39. After so stating, the Court posed the question whether in

such a case, the provisions of Section 2(2), which indicates that

Part I of the Act would apply, where the place of arbitration is

India, would be a bar to the invocation of provisions of Sections

34 and 27 of the Act, which have been conducted in Singapore.

The Court referred to the decision in Bhatia International

(supra) wherein it was held that there cannot be any automatic

exclusion, but on express or implied exclusion and opined

regard being had to the Rule 32 of the SIAC Rules, the law laid

down in Bhatia International (supra) would not be applicable.

The said Rule, being pertinent to the issue in question, is

reproduced below:-

32. Where the seat of arbitration is Singapore, the

law of the arbitration under these Rules shall be the
International Arbitration Act (Cap. 143-A, 2002 Edn.,
Statutes of the Republic of Singapore) or its modifica-
tion or re-enactment thereof.

And in that context, the Court ruled thus:

Having agreed to the above, it was no longer available

to the appellant to contend that the proper law of the
agreement would apply to the arbitration proceedings.
The decision in Bhatia International v. Bulk Trading
S.A., which was applied subsequently in Venture
Global Engg. v. Satyam Computer Services Ltd. and Ci-
 38

tation Infowares Ltd. v. Equinox Corpn. would have no

application once the parties agreed by virtue of Clause
27.1 of the agreement that the arbitration proceedings
would be conducted in Singapore i.e. the seat of arbi-
tration would be in Singapore, in accordance with the
Singapore International Arbitration Centre Rules as in
force at the time of signing of the agreement.

xxxxx xxxxx xxxxx

In the instant case, once the parties had specifically

agreed that the arbitration proceedings would be con-
ducted in accordance with the SIAC Rules, which in-
cludes Rule 32, the decision in Bhatia International1
and the subsequent decisions on the same lines,
would no longer apply in the instant case where the
parties had willingly agreed to be governed by the
SIAC Rules.
[Emphasis added]

40. In Reliance Industries Ltd. (supra), the two-Judge Bench,

while referring to the submissions of the learned counsel for the

appellant therein had also referred to the pronouncement in

Yograj Infrastructure Ltd. (supra) and dealt with it thus:

Again this Court in Yograj Infrastructure (two-Judge

Bench) considered a similar arbitration agreement. It
was provided that the arbitration proceedings shall be
conducted in English in Singapore in accordance with
the Singapore International Arbitration Centre (SIAC)
Rules (Clause 27.1). Clause 27.2 provided that the ar-
bitration shall take place in Singapore and be con-
ducted in English language. This Court held that hav-
ing agreed that the seat of arbitration would be Singa-
pore and that the curial law of the arbitration proceed-
ings would be the SIAC Rules, it was no longer open to
the appellant to contend that an application under
Section 11(6) of the Arbitration Act, 1996 would be
 39

maintainable. This judgment has specifically taken

into consideration the law laid down in Bhatia Interna-
tional and Venture Global. The same view has been
taken by the Delhi High Court, the Bombay High
Court and the Gujarat High Court, in fact this Court
in Videocon has specifically approved the observations
made by the Gujarat High Court in Hardy Oil and Gas
Ltd. v. Hindustan Oil Exploration Co. Ltd.20

41. Coming to the stipulations in the present arbitration

clause, it is clear as day that if any dispute or difference would

arise under the charter, arbitration in London to apply; that the

arbitrators are to be commercial men who are members of

London Arbitration Association; the contract is to be construed

and governed by English Law; and that the arbitration should be

conducted, if the claim is for a lesser sum, in accordance with

small claims procedure of the London Maritime Arbitration

Association. There is no other provision in the agreement that

any other law would govern the arbitration clause.

42. Mr. Giri, learned senior counsel would submit that from the

clause which is a comprehensive one, it is London, which is the

seat of arbitration. In Videocon Industries Ltd. (supra), as we

have analysed earlier, Article 33.1 of the agreement which

stipulated that subject to the provisions of Article 34.12, the

contract would be governed and interpreted in accordance with

20 (2006) 1 Guj LR 658

 40

the laws of India. Clause 34.12 of the agreement read as

follows:

34.12. Venue and law of arbitration agreement.The

venue of sole expert, conciliation or arbitration pro-
ceedings pursuant to this article, unless the parties
otherwise agree, shall be Kuala Lumpur, Malaysia,
and shall be conducted in the English language. Inso-
far as practicable, the parties shall continue to imple-
ment the terms of this contract notwithstanding the
initiation of arbitral proceedings and any pending
claim or dispute. Notwithstanding the provisions of Ar-
ticle 33.1, the arbitration agreement contained in this
Article 34 shall be governed by the laws of England.

43. In that context, the Court referred to Section 3 of the

English Arbitration Act, 1996 and as has been stated earlier,

opined that as per the English law, the seat of arbitration as per

the said provision would mean juridical seat of arbitration and

accordingly opined that principles stated in Bhatia

International (supra) would not be applicable.

44. In the present case, the agreement stipulates that the

contract is to be governed and construed according to the

English law. This occurs in the arbitration clause. Mr.

Vishwanathan, learned senior counsel, would submit that this

part has to be interpreted as a part of curial law and not as a

proper law or substantive law. It is his submission that it

cannot be equated with the seat of arbitration. As we perceive, it

 41

forms as a part of the arbitration clause. There is ample

indication through various phrases like arbitration in London to

apply, arbitrators are to be the members of the London

Arbitration Association and the contract to be governed and

construed according to English Law. It is worth noting that

there is no other stipulation relating to the applicability of any

law to the agreement. There is no other clause anywhere in the

contract. That apart, it is also postulated that if the dispute is

for an amount less that US $ 50000 then, the arbitration should

be conducted in accordance with small claims procedure of the

London Maritime Arbitration Association. When the aforesaid

stipulations are read and appreciated in the contextual

perspective, the presumed intention of the parties is clear as

crystal that the juridical seat of arbitration would be London. In

this context, a passage from Mitsubishi Heavy Industries Ltd.

v. Gulf Bank21 is worth reproducing:

It is of course both useful and frequently necessary

when construing a clause in a contract to have regard
to the overall commercial purpose of the contract in
the broad sense of the type and general content, the
relationship of the parties and such common
commercial purpose as may clearly emerge from such
an exercise. However, it does not seem to me to be a
proper approach to the construction of a default
clause in a commercial contract to seek or purport to
21 [1997] 1 Lloyds Rep. 343
 42

elicit some self-contained commercial purpose

underlying the clause which is or may be wider than
the ordinary or usual construction of the words of
each sub-clause will yield.

45. In Cargill International S.A. v. Bangladesh Sugar &

Food Industries Corp.22, Potter L.J. balanced the two

approaches and said:

In this connection [counsel] has rightly made the

point that, when construing the effect of particular
words in a commercial contract, it is wrong to put a
label on the contract in advance and this to approach
the question of construction on the basis of a
pre-conception as to the contacts intended effect, with
the result that a strained construction is placed on
words, clear in themselves, in order to fit them within
such pre-conception...

On the other hand, modern principles of

construction require the court to have regard to the
commercial background, the context of the contract ad
the circumstances of the parties, and to consider
whether, against that background and I that context,
to give the words a particular or restricted meaning
would lead to an apparently unreasonable and unfair
result.

46. Thus, interpreting the clause in question on the bedrock of

the aforesaid principles it is vivid that the intended effect is to

have the seat of arbitration at London. The commercial

background, the context of the contract and the circumstances

of the parties and in the background in which the contract was

entered into, irresistibly lead in that direction. We are not

22 [1998] 1 W.L.R. 461 CA
 43

impressed by the submission that by such interpretation it will

put the respondent in an advantageous position. Therefore, we

think it would be appropriate to interpret the clause that it is a

proper clause or substantial clause and not a curial or a

procedural one by which the arbitration proceedings are to be

conducted and hence, we are disposed to think that the seat of

arbitration will be at London.

47. Having said that the implied exclusion principle stated in

Bhatia International (supra) would be applicable, regard being

had to the clause in the agreement, there is no need to dwell

upon the contention raised pertaining to the addendum, for any

interpretation placed on the said document would not make any

difference to the ultimate conclusion that we have already

arrived at.

48. Before parting with the case, it is obligatory on our part to

state that the Division Bench of the High Court has allowed the

petition on the foundation that the Bharat Aluminium Co. case

would govern the field and, therefore, the court below had no

jurisdiction is not correct. But as has been analysed and

discussed by us, even applying the principles laid down in

Bhatia International (supra) and scanning the anatomy of the

 44

arbitration clause, we have arrived at the conclusion that the

courts in India will not have jurisdiction as there is implied

exclusion.

49. Consequently, for different reasons, we concur with the

conclusion arrived at by the High Court and accordingly, the

appeal, being sans merit, stands dismissed. However, in the

facts and circumstances of the case, there shall be no order as

to costs.

.............................J.
[Dipak Misra]

..........................., J.
[Prafulla C. Pant]
New Delhi
March 10, 2015
 45

ITEM NO.1C COURT NO.5 SECTION XIA

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

Civil Appeal No(s). 610/2015

HARMONY INNOVATION SHIPPING LTD. Appellant(s)

VERSUS

GUPTA COAL INDIA LTD. AND ANR. Respondent(s)

Date : 10/03/2015 This appeal was called on for hearing today.

For Petitioner(s) Mr. K.V. Vishwanathan, Sr. Adv.

Mr. Ashwin Shankar, Adv.
Mr. Abhishek Kaushik, Adv.
Mr. Sameer Dawar, Adv.
Mr. Abhinav Mukerji, AOR

For Respondent(s) Mr. V. Giri, Sr. Adv.

Mr. Raghenth Basant, Adv.
Mr. Hardeep Singh, Adv.
Ms. Aditi Mishra, Adv.
Ms. Liz Mathew, AOR

Hon'ble Mr. Justice Dipak Misra pronounced the judgment of

the bench comprising His Lordship and Hon'ble Mr. Justice Prafulla
C. Pant.

The appal, being sans merit, stands dismissed in terms of the

signed reportable judgment.

(Gulshan Kumar Arora) (Tapan Kumar Chakraborty)

Court Master Court Master

(Signed Reportable judgment is placed on the file)