Bhatia International vs Bulk Trading S. A. & Anr on 13 March, 2002

    CASE NO.:

Appeal (civil) 6527 of 2001

PETITIONER:

BHATIA INTERNATIONAL

 Vs.

RESPONDENT:

BULK TRADING S. A. & ANR.

DATE OF JUDGMENT: 13/03/2002

BENCH:

G.B. Pattanaik, S.N. Phukan & S.N. Variava

JUDGMENT:

S. N. VARIAVA, J.

1. This Appeal is against a Judgment dated 10th October, 2000 passed by the
Madhya Pradesh High Court.

2. Briefly stated the facts are as follows:

The Appellant entered into a contract with the 1st Respondent on 9th May, 1997.
This contract contained an arbitration clause which provided that arbitration
was to be as per the rules of the International Chamber of Commerce (for short
ICC). On 23rd October, 1997 the 1st Respondent filed a request for arbitration
with ICC. Parties agreed that the arbitration be held in Paris, France. ICC has
appointed a sole arbitrator

3. 1st Respondent filed an application under Section 9 of the Arbitration and
Conciliation Act, 1996 (hereinafter called the said Act) before the IIIrd
Additional District Judge, Indore, M.P. against the Appellant and the 2nd
Respondent. One of the interim reliefs sought was an order of injunction
restraining these parties from alienating, transferring and/or creating third
party right, disposing of, dealing with and/or selling their business assets and
properties. The Appellant raised the plea of maintainability of such an
application. The Appellant contended that Part I of the said Act would not apply
to arbitrations where the place of arbitration is not in India. This application
was dismissed by the IIIrd Additional District Judge on 1st February, 2000. It
was held that the Court at Indore had jurisdiction and the application was
maintainable. The Appellant filed a Writ Petition before the High Court of
Madhya Pradesh, Indore Bench. The said Writ Petition has been dismissed by the
impugned Judgment dated 10th October, 2000.

4. On behalf of the Appellants, Mr. Sen submits that Part I of the said Act only
applies to arbitrations where the place of arbitration is in India. He submits
that if the place of arbitration is not in India then Part II of the said Act
would apply. He relies on sub-section (2) Section 2 of the said Act which
provides that Part I shall apply where the place of arbitration is in India. He
submits that sub-section (2) of Section 2 makes it clear that the provisions of
Part I do not apply where the place of arbitration is not in India. Mr. Sen
points out that the said Act is based on UNCITRAL Model Law on International
Commercial Arbitration. He points out that Article 1(2) of UNCITRAL Model Law
provides that the law, except Articles 8, 9, 35 and 36 of the Model Law, would
apply only if the Arbitration takes place in the territory of the State. Mr. Sen
submits that Article 9 of the UNCITRAL Model Law permits a party to request a
Court for interim measure even if the arbitration is not in the territory of the
State. He submits that whilst framing the said Act the Legislature has purposely
not adopted Article 1(2) of the UNCITRAL Model Law. He submits that this clearly
shows the intention of the Legislature that they did not want Part I to apply to
arbitrations which take place outside India.

5. Mr. Sen points out that Section 2(f) of the said Act defines an
"international commercial arbitration". Mr. Sen submits that an international
commercial arbitration could take place either in India or outside India. He
submits that if the international commercial arbitration takes place out of
India then Part I of the said Act would not apply. He submits that Part II of
the said Act applies to foreign awards.

6. Mr. Sen fairly draws the attention of this Court to sub-sections (3), (4) and
(5) of Section 2, which read as follows: "2(3) This Part shall not affect any
other law for the time being in force by virtue of which certain disputes may
not be submitted to arbitration.

(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall
apply to every arbitration under any other enactment for the time being in
force, as if the arbitration were pursuant to an arbitration agreement and as if
that other enactment were an arbitration agreement except in so far as the
provisions of this Part are inconsistent with that other enactment or with any
rules made thereunder.

(5) Subject to the provisions of sub-section (4), and save in so far as is
otherwise provided by any law for the time being in force or in any agreement in
force between India and any other country or countries, this Part shall apply to
all arbitrations and to all proceedings relating thereto."

Mr. Sen submits that sub-sections (3), (4) and (5) of Section 2 would
necessarily only apply to arbitration which take place in India. He submits
that, therefore, even though the sub-section (4) of Section 2 uses the words
"every arbitration" and sub-section (5) of Section 2 uses the words "all
arbitrations and to all proceedings relating thereto", they must necessarily
refer only to arbitrations which take place in India. He submits that otherwise
there would be a conflict between sub section (2) on one hand and sub sections
(4) and/or (5) on the other. Mr. Sen submits that if it is held that Part I
applies to all arbitrations i.e. even to arbitrations whose place of arbitration
is not in India, then Sub section (2) of Section 2 would become redundant and/or
otiose.

7. Mr. Sen submits that in this matter arbitration is being held in Paris i.e.
out of India. He submits that to such arbitrations Part I does not apply. He
submits that Sections 9 and 17 fall in Part I. He submits that Sections 9 and 17
would not apply and cannot be used in cases where the place of arbitration is
not in India.

8. Mr. Sen submits out that Part II deals with enforcement of foreign awards and
makes elaborate provisions in respect thereof. He points out that in Part II
there is no provision similar to Sections 9 and

17. He submits that the Legislature, whilst providing for foreign awards, has
purposely omitted to make any provision for interim measures either by the Court
or by arbitral tribunal. He submits that the reason for this is obvious. He
submits that in cases, where arbitrations take place outside India they would be
governed by the rules of the country or the body under whose jurisdiction they
are being conducted. He submits that under the ICC Rules of Arbitration Article
23 provides for interim measures. Mr. Sen submits that the remedy, if any, is to
apply for interim relief under Article 23.

9. Mr. Sen submits that a plain reading of Section 9 also makes it clear that it
would not apply to arbitrations which take place outside India. He submits that
Section 9 provides that an application for interim measure must be made before
the award is enforced in accordance with Section 36. Mr. Sen submits that
Section 36 deals with enforcement of domestic awards only. Mr. Sen submits that
provisions for enforcement of foreign awards are contained in Sections 48, 49,
57 and 58. He submits that it is very significant that Section 9 does not talk
of enforcement of the award in accordance with Sections 48, 49, 57 and 58. Mr.
Sen submits that this also makes it clear that the provisions of Part I of the
said Act do not apply to arbitrations which do not take place in India.

10. Mr. Sen also relies on Section 5 of the said Act and submits that the
underlying principle is that a judicial authority should not interfere except as
provided in said act. He submits that the rational behind this is that there
should be minimum interference by Courts.

11. Mr. Sen submits that the Court in Indore could not have entertained the
application under Section 9 as Part I did not apply to arbitrations which take
place outside India. He submits that the Court in Indore and the High Court were
wrong in rejecting the application of the Appellant and in holding that the
Court had jurisdiction.

12. Mr. Sen states that on this aspect there is no authority of this Court. He
points out that a number of High Courts including the High Courts at Orissa,
Bombay, Madras, Delhi and Calcutta have held that Part I of the said Act would
not apply to arbitrations which take place outside India. He points out that
earlier, two single Judges of the Delhi High Court had held that Part I applies
to arbitrations which take place outside India. He points out that now a
Division Bench of the Delhi High Court has held that Part I does not apply to
arbitrations which take place outside India. He submits that therefore now the
only High Court which has held, that Part I applies to arbitrations which take
place outside India, is the Madhya Pradesh High Court, which has so held by the
impugned Judgment. Mr. Sen took us through the authority of the Division Bench
of the Delhi High Court in the case of Marriott International Inc. v. Ansal
Hotels Ltd. reported in AIR (2000) Delhi 377. He also took us through an
unreported Judgment of a Division Bench of the Calcutta High Court dated 27th
January, 1998 in the case of Keventea Agro Ltd. v. Agram Company Ltd.. These
authorities adopt, more or less, the same reasoning as has been canvassed by Mr.
Sen. The Delhi High Court further notices that this reasoning may lead to a
situation where a party may be left remedy-less and, therefore, would work
hardship on a party. The Delhi High Court however observed as follows :

" We may agree with the learned counsel for the appellant that it may, in some
cases, lead to hardship to a party, however, when the language of the statute is
plain and unambiguous and admits of only one meaning. The question of
construction of statute arises, for the Act speaks for itself even if the result
is strange or surprising, unreasonable or unjust or oppression as it is not for
the Courts to extend the scope of the statute beyond the contemplation of the
legislature. It is entirely for the legislature to look into this question."

13. On the other hand Mr. Sundaram for the Respondents has taken us through the
various provisions of the said Act. He has ably submitted that a conjoint
reading of the provisions shows that Part I is to apply to all arbitrations. He
submits that unless the parties by their agreement excludes its provisions Part
I would also apply to all international commercial arbitrations including those
that take place out of India.

14. At first blush the arguments of Mr. Sen appear very attractive. Undoubtedly
sub-section (2) of Section 2 states that Part I is to apply where the place of
arbitration is in India. Undoubtedly, Part II applies to foreign awards. Whilst
the submissions of Mr. Sen are attractive one has to keep in mind the
consequence which would follow if they are accepted. The result would :-

a) amount to holding that the Legislature has left a lacunae in the said Act.
There would be a lacunae as neither Part I or II would apply to arbitrations
held in a country which is not a signatory to the New York Convention or the
Geneva Convention (hereinafter called a non- convention country). It would mean
that there is no law, in India, governing such arbitrations.

b) lead to an anomalous situation, inasmuch Part I would apply to Jammu and
Kashmir in all international commercial arbitrations but Part I would not apply
to the rest of India if the arbitration takes place out of India.

c) lead to a conflict between sub-section (2) of Section 2 on one hand and sub-
sections (4) and (5) of Section 2 on the other. Further sub- section (2) of
Section 2 would also be in conflict with Section 1 which provides that the Act
extends to the whole of India.

d) leave a party remediless inasmuch as in international commercial arbitrations
which take place out of India the party would not be able to apply for interim
relief in India even though the properties and assets are in India. Thus a party
may not be able to get any interim relief at all.

15. It is thus necessary to see whether the language of the said Act is so plain
and unambiguous as to admit of only the interpretation suggested by Mr. Sen. It
must be borne in mind that the very object of the Arbitration and Conciliation
Act of 1996, was to establish a uniform legal framework for the fair and
efficient settlement of disputes arising in international commercial
arbitration. The conventional way of interpreting a statute is to seek the
intention of its makers. If a statutory provision is open to more than one
interpretation then the Court has to choose that interpretation which represents
the true intention of the legislature. This task often is not an easy one and
several difficulties arise on account of variety of reasons, but at the same, it
must be borne in mind that it is impossible even for the most imaginative
legislature to forestall exhaustively situations and circumstances that may
emerge after enacting a statute where its application may be called for. It is
in such a situation the Courts' duty to expound arises with a caution that the
Court should not try to legislate. While examining a particular provision of a
statute to find out whether the jurisdiction of a Court is ousted or not, the
principle of universal application is that ordinarily the jurisdiction may not
be ousted unless the very statutory provision explicitly indicates or even by
inferential conclusion the Court arrives at the same when such a conclusion is
the only conclusion. Notwithstanding the conventional principle that the duty of
judges is to expound and not to legislate. The Courts have taken the view that
the judicial art of interpretation and appraisal is imbued with creativity and
realism and since interpretation always implied a degree of discretion and
choice, the Court would adopt particularly in areas such as, constitutional
adjudication dealing with social and defuse rights. Courts are therefore, held
as "finishers, refiners, and polishers of legislatures which gives them in a
state requiring varying degrees of further processing". (see Corrocraft Ltd. vs.
Pan American Airways (1968) 3 WLR 714 at page 732, AIR 1975 SC 1951 at page
1957. If a language used is capable of bearing more than one construction, in
selecting the true meaning, regard must be had to the consequences, resulting
from adopting the alternative constructions. A construction that results in
hardship, serious inconvenience, injustice, absurdity or anomaly or which leads
to inconsistency or uncertainty and friction in the system which the statute
purports to regulate has to be rejected and preference should be given to that
construction which avoids such results. (see Johnson vs. Moreton (1978) 3 All.
ER 37 and Stock vs. Frank Jones (Tipton) Ltd. (1978) 1 All. ER 948). In
selecting out of different interpretations the Court will adopt that which is
just reasonable and sensible rather than that which is none of those things, as
it may be presumed that the legislature should have used the word in that
interpretation which least offends our sense of justice. In Shanon Realites Ltd.
vs. Sant Michael (924) A.C. page 185 at page 192-193 Lord Shaw stated, "where
words of a statute are clear, they must, of course, be followed, but in their
Lordships opinion where alternative constructions are equally open that
alternative is to be chosen which will be consistent with the smooth working of
the system which the statute purports to be regulating and that alternative is
to be rejected which will introduce uncertainty, friction or confusion into the
working of the system." This principle was accepted by Subba Rao, J. while
construing Section 193 of the Sea Customs Act and in coming to the conclusion
that the Chief of Customs Authority was not an officer of custom. (AIR 1961 SC
1549).

16. A reading of the provisions shows that the said Act applies to arbitrations
which are held in India between Indian nationals and to international commercial
arbitrations whether held in India or out of India. Section 2(f) defines an
international commercial arbitration. The definition makes no distinction
between international commercial arbitrations held in India or outside India. An
international commercial arbitration may be held in a country which is a
signatory to either the New York Convention or the Geneva Convention
(hereinafter called the convention country). An international commercial
arbitration may be held in a non-convention country. The said Act nowhere
provides that its provisions are not to apply to international commercial
arbitrations which take place in a non-convention country. Admittedly Part II
only applies to arbitrations which take place in a convention country. Mr. Sen
fairly admitted that Part II would not apply to an international commercial
arbitration which takes place in a non-convention country. He also fairly
admitted that there would be countries which are not signatories either to the
New York Convention or to the Geneva Convention. It is not possible to accept
submission that the said Act makes no provision for international commercial
arbitrations which take place in a non-convention country.

17. Section 1 of the said Act reads as follows:

"1. Short title, extent and commencement.- (1) This Act may be called the
Arbitration and Conciliation Act, 1996.

 (2) It extends to the whole of India:

 Provided that Parts I, III and IV shall extend to the State of Jammu and
Kashmir only in so far as they relate to international commercial arbitration
or, as the case may be, international commercial conciliation."

The words "this Act" means the entire Act. This shows that the entire Act,
including Part I, applies to the whole of India. The fact that all Parts apply
to whole of India is clear from the proviso which provides that Parts I, III and
IV will apply to the State of Jammu and Kashmir only so far as international
commercial arbitrations/conciliations are concerned. Significantly the proviso
does not state that Part I would apply to Jammu and Kashmir only if the place of
the international commercial arbitration is in Jammu and Kashmir. Thus if sub-
section (2) of Section 2 is read in the manner suggested by Mr. Sen there would
be a conflict between Section 1 and Section 2(2). There would also be an anomaly
inasmuch as even if an international commercial arbitration takes place outside
India, Part I would continue to apply in Jammu and Kashmir, but it would not
apply to the rest of India. The Legislature could not have so intended.

18. Section 2(a) defines "arbitration" as meaning any arbitration whether or not
administered by a permanent arbitral institution. Thus, this definition
recognises that the arbitration could be under a body like the Indian Chambers
of Commerce or the International Chamber of Commerce. Arbitrations under
International Chamber of Commercie would be held, in most cases, out of India.
Section 2 (c) provides that the term "arbitral award" would include an interim
award.

19. Section 2(f) of the said Act defines an international commercial
arbitration. It reads as follows:

"2(f) "international commercial arbitration" means an arbitration relating to
disputes arising out of legal relationships, whether contractual or not,
considered as commercial under the law in force in India and where at least one
of the parties is -

(i) an individual who is a national of, or habitually resident in, any country
other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of

individuals whose central management and

control is exercised in any country other than

India; or

(iv) the Government of a foreign country."

As stated above the definition of "international commercial arbitration" makes
no distinction between international commercial arbitrations which take place in
India or internal commercial arbitrations which take place outside India.

20. Section 2(e) defines "Court" as follows:

2(e) "Court" means the principle Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the questions forming the subject-
matter of the arbitration if the same had been the subject- matter of a suit,
but does not include any civil court of a grade inferior to such principal Civil
Court, or any Court of Small Causes."

A Court is one which would otherwise have jurisdiction in respect of the subject
matter. The definition does not provide that the Courts in India, will not have
jurisdiction if an international commercial arbitration takes place outside
India. Courts in India would have jurisdiction even in respect of an
international commercial arbitration. As stated above an ouster of jurisdiction
cannot be implied. An ouster of jurisdiction has to be express.

21. Now let us look at sub-sections (2), (3), (4) and (5) 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 affect 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 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.

22. If read in this manner there would be no conflict between Section 1 and
Section 2(2). The words "every arbitration" in sub- section (4) of Section 2 and
the words "all arbitrations and all proceedings relating thereto" in sub-section
(5) of Section 2 are wide. Sub-sections (4) and (5) of Section 2 are not made
subject to sub- section (2) of Section 2. It is significant that sub-section (5)
is made subject to sub-section (4) but not to sub-section (2). To accept Mr.
Sen's submission would necessitate adding words in sub-sections (4) and (5) of
Section 2, which the Legislature has purposely omitted to add viz. "Subject to
provision of sub-section (2)". However read in the manner set out hereinabove
there would also be no conflict between sub-section (2) of Section 2 and sub-
sections (4) and/or (5) of Section 2.

23. That the Legislature did not intend to exclude the applicability of Part I
to arbitrations, which take place outside India, is further clear from certain
other provisions of the said Act. Sub-section (7) of Section 2 reads as follows:

"(7) An arbitral award made under this Part shall be considered as a domestic
award."

As is set out hereinabove the said Act applies to (a) arbitrations held in India
between Indians (b) international commercial arbitrations. As set out
hereinabove international commercial arbitrations may take place in India or
outside India. Outside India an international commercial arbitration may be held
in a convention country or in a non-convention country. The said Act however
only classifies awards as "domestic awards" or "foreign awards". Mr. Sen admits
that provisions of Part II makes it clear that "foreign awards" are only those
where the arbitration takes place in a convention country. Awards in arbitration
proceedings which take place in a non- convention country are not considered to
be "foreign awards" under the said Act. They would thus not be covered by Part
II. An award passed in an arbitration which takes place in India would be a
"domestic award". There would thus be no need to define an award as a "domestic
award" unless the intention was to cover awards which would otherwise not be
covered by this definition. Strictly speaking an award passed in an arbitration
which takes place in a non-convention country would not be a "domestic awards".
Thus the necessity is to define a "domestic award" as including all awards made
under Part I. The definition indicates that an award made in an international
commercial arbitration held in a non-convention country is also considered to be
a "domestic award".

24. Section 5 provides that a judicial authority shall not intervene except
where so provided in Part I. Section 8 of the said Act permits a judicial
authority before whom an action is brought in a matter to refer parties to
arbitration. If the matters were to be taken before a judicial authority in
India it would be a Court as defined in Section 2(e). Thus if Part I was to only
apply to arbitrations which take place in India the term "Court" would have been
used in Sections 5 and 8 of the said Act. The Legislature was aware that, in
international commercial arbitrations, a matter may be taken before a judicial
authority outside India. As Part I was also to apply to international commercial
arbitrations held outside India the term "judicial authority" has been used in
Sections 5 and 8.

25. The beginning part of Section 28 reads as follows:

"28. Rules applicable to substance of dispute.- (1) where the place of
arbitration is situate in India,-

 xxx xxx xxx

 xxx xxx xxx"

Section 28 is in Part I. If Part I was not to apply to an arbitration which
takes place outside India there would be no necessity to specify that the rules
are to apply "where the place of arbitration is situate in India". It has been
held in the case of National Thermal Power Corporation vs. Singer Company and
others reported in (1992) 3 SCC 551 that in international commercial
arbitrations parties are at liberty to choose, expressly or by necessary
implication, the law and the procedure to be made applicable. The procedure or
the rules governing such arbitration may be of the country where the arbitration
is being held or the body under whose aegis the arbitration is being held. All
bodies which conduct arbitrations and all countries have rules and laws
governing arbitrations. Thus Section 28 does not provide for rules where the
place of arbitration is out of India.

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 indicated the intention
of Legislature not to apply Sections 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 Sections
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..

27. Mr. Sen had also relied upon Article 1(2) of the UNCITRAL Model Law and had
submitted that India has purposely not adopted this Article. He had submitted
that the fact that India had not provided (like in the UNCITRAL Model Law) that
Section 9 would apply to arbitral proceedings which take place out of India
indicated the intention of the Legislature not to apply Section 9 to such
arbitrations. We are unable to accept this submission. Article 1(2) of UNCITRAL
Model Law reads as follows :

(2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if
the place of arbitration is in the territory of this State." (emphasis supplied)

Thus Article 1(2) of UNCITRAL Model Laws uses the word "only" to emphasize that
the provisions of that Law are to apply if the place of arbitration is in the
territory of that State. Significantly in Section 2(2) the word "only" has been
omitted. The omission of this word changes the whole complexion of the sentence.
The omission of the word "only" in Section 2(2) indicates that this sub-section
is only an inclusive and clarificatory provision. As stated above it is not
providing that provisions of Part I do not apply to arbitration which take place
outside India. Thus there was no necessity of seperately providing that Section
9 would apply.

28. Now let us consider Section 9. It reads as follows: "9. Interim measures,
etc. by court.- A party may, before or during arbitral proceedings or at any
time after the making of the arbitral award but before it is enforced in
accordance with section 36, apply to a court:-

(i) for the appointment of a guardian for a minor or a person of unsound mind
for the purposes of

arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following
matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the
subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is
the subject-matter of the dispute in arbitration, or as to which any question
may arise therein and authorising for any of the aforesaid purposes any person
to enter upon any

land or building in the possession of any party, or authorising any samples to
be taken or any

observation to be made, or experiment to be tried, which may be necessary or
expedient for the

purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the court to be
just and convenient,

and the Court shall have the same power for making orders as it has for the
purpose of, and in relation to, any proceedings before it."

Thus under Section 9 a party could apply to the court (a) before, (b) during
arbitral proceedings or (c) after the making of the arbitral award but before it
is enforced in accordance with Section 36. The words "in accordance with Section
36" can only go with the words "after the making of the arbitral award". It is
clear that the words "in accordance with Section 36" can have no reference to an
application made "before" or "during the arbitral proceedings". Thus it is clear
that an application for interim measure can be made to Courts in India, whether
or not the arbitration takes place in India, before or during arbitral
proceedings. Once an Award is passed, then that award itself can be executed.
Sections 49 and 58 provide that awards covered by Part II are deemed to be a
decree of the Court. Thus "foreign awards" which are enforceable in India are
deemed to be decrees. A domestic award has to be enforced under the provisions
of Civil Procedure Code. All that Section 36 provides is that an enforcement of
a domestic award is to take place after the time to make an application to set
aside the award has expired or such an application has been refused. Section 9
does suggest that once an award is made an application for interim measure can
only be made if the award is a "domestic award" as defined in Section 2(7) of
the said Act. Thus where the Legislature wanted to restrict the applicability of
Section 9 it has done so specifically.

29. We see no substance in the submission that there would be unnecessary
interference by courts in arbitral proceedings. Section 5 provides that no
judicial authority shall intervene except where so provided. Section 9 does not
permit any or all applications. It only permits applications for interim
measures mentioned in clauses (i) and (ii) thereof. Thus there cannot be
applications under Section 9 for stay of arbitral proceedings or to challenge
the existence or validity of arbitration agreements or the jurisdiction of the
arbitral tribunal. All such challenges would have to be made before the arbitral
tribunal under the said Act.

30. Mr. Sen had also submitted that the term "arbitral award" includes an
interim award. He had submitted that it would be open for the arbitral tribunal
to pass interim awards and those interim awards could be enforced in India under
Part II. However, there is a difference between an "interim award" and an
"interim order". Undoubtedly, the arbitral tribunal could pass an interim award.
But an interim order or directions passed by the arbitral tribunal would not be
enforceable in India. Thus even in respect of arbitrations covered by Part II a
party would be precluded from getting any interim relief. In any event, on Mr.
Sen's interpretation, an award passed in arbitral proceedings held in a non-
convention country could not be enforced. Thus such a party would be left
completely remediless.

31. If a party cannot secure, before or during the pendency of the arbitral
proceedings, an interim order in respects of items provided in Section 9(i) &
(ii) the result may be that the arbitration proceedings may themselves get
frustrated e.g. by non appointment of a guardian for a minor or person of
unsound mind or the subject matter of the arbitration agreement not being
preserved. This could never have been the intention of the Legislature.

32. To conclude we hold that the provisions of Part I would apply to all
arbitrations and to all proceedings relating thereto. Where such arbitration is
held in India the provisions of Part I would compulsory apply and parties are
free to deviate only to the extent permitted by the derogable provisions of Part
I. In cases of international commercial arbitrations held out of India
provisions of Part I would apply unless the parties by agreement, express or
implied, exclude all or any of its provisions. In that case the laws or rules
chosen by the parties would prevail. Any provision, in Part I, which is contrary
to or excluded by that law or rules will not apply.

33. 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
necessary 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
Arbitration. Article 23 of 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 Arbitral Tribunal may, at the request of a party, order
any interim or conservatory measure it deems appropriate. The Arbitral Tribunal
may make the granting of any such measure subject to appropriate 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 measures. The application of a party to a judicial
authority for such measures or for the implementation of any such measures
ordered by an Arbitral Tribunal 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."

34. 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.

35. Lastly it must be stated that the said Act does not appear to be a well
drafted legislation. Therefore the High Courts of Orissa, Bombay, Madras, Delhi
and Calcutta cannot be faulted for interpreting it in the manner indicated
above. However, in our view a proper and conjoint reading of all the provisions
indicates that Part I is to apply also to international commercial arbitrations
which take place out of India, unless the parties by agreement, express or
implied exclude it or any of its provisions. Such an interpretation does not
lead to any conflict between any of the provisions of the said Act. On this
interpretation there is no lacunae in the said Act. This interpretation also
does not leave a party remedyless. Thus such an interpretation has to be
preferred to the one adopted by the High Courts of Orissa, Bombay, Madras, Delhi
and Calcutta. It will therefore have to be held that the contrary view taken by
these High Courts is not good law.

36. In this view of the matter we see no reason to interfere with the impugned
judgment. The Appeal stands dismissed. There will be no Order as to costs
throughout.

...J.

(G.B. PATTANAIK)

...J.

(S.N. PHUKAN)

..J.

(S. N. VARIAVA)

March 13, 2002.