Bharti Televentures Ltd. vs Dss Enterprises Private Ltd. And ... on 17 August, 2005

    Bharti Televentures Ltd. vs Dss Enterprises Private Ltd. And Ors. on 17/8/2005

JUDGMENT

   Vikramajit Sen, J.

   1. Should the Court decline to enter upon the controversy of whether an
implementable arbitration agreement exists between the parties has yet again
arisen like the mythical phoenix from the ashes of litigation. Mr. Rajiv
Sawhney, learned Senior counsel for the contesting Defendant has contended that
the Court must forthwith refer the parties to arbitration, leaving it to the
Arbitral Tribunal to decide upon its own jurisdiction viz. whether the parties
before it had agreed to resolve their disputes through arbitration and/or
whether the original compact to this effect does not subsist as it had been
abandoned and given up or should be deemed to have been given up. In this case I
have not been presented with a clean slate on which to write the judgment
inasmuch as the controversy between the parties has received jural attention
already. Benefitting from the detailed and erudite legal submissions made before
me, it is my understanding that if possible or plausible cases are presented on
behalf of both the adversaries, then the Court should direct them to ventilate
their respective cases before the arbitrators. However, if upon even a cursory
consideration of the facts there is a strong preponderant possibility that one
of the parties will needlessly and vexatiously be subjected to arbitration,
thereby compelling it to expend avoidable time, effort and expense, the
Arbitration & Conciliation Act, 1996 (hereinafter referred to as `Arb. & Con.
Act') expects the Court to look into the matter, and thereby obviate a futile
and facile Reference. This opinion holds irrespective of whether it is in the
context of a domestic or a foreign arbitration; in fact this determination is
essential in the latter case.

   2. Mr. Rajiv Sawhney has relied very heavily on the decision of the Hon'ble
Supreme Court titled Bhatia International v. Bulk Trading S.A. and Anr., for the
proposition that in all instances where parties contract with each other that
Indian laws would apply to the arbitration, the Award rendered thereon would
invariably be pursuant to a domestic and not a foreign arbitration; accordingly,
Part I and not Part II would govern any disputes that may be brought before the
Court or Arbitral Tribunal. It is through this dialectic that he has argued that
Section 45 of the Arb. & Con. Act could not be resorted to; that instead Section
8 of the Arb. & Con Act mandates the Court to refer the parties to arbitration,
leaving it to the Arbitral Tribunal under Section 16 to settle objections even
to their own jurisdiction, both of which fall in Part I of the Arb. & Con. Act.
Mr. Sawhney has contended that it is the applicable law and not the venue of the
arbitration which is the determinative factor in resolving this legal nodus. It
is apparent from a perusal of this celebrated decision that the argument that
every statute should be interpreted in a manner which would not lead to its
extraterritoriality was not raised at all. Therefore, for the Arb. & Con. Act to
apply it is imperative to find some connectivity with India. (see C.E.B. Draper
& Sons Ltd. v. Edward Turner & Son, Ltd., [1964] 3 All E.R. 148.).

   3. The opinion of the Apex Court in Bhatia International case (supra) can be
gleaned from the following passages--

     16. A reading of the provisions show 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(1)(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 the submission that the said Act makes no provisions for
international commercial arbitrations which take place in a non-convention
country.

     ...

     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:

     2. (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, and (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 make 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 award'. 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'.

     ...

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

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

* * *

     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 v. Singer Co. that in
international commercial arbitration 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 which 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 the 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 Section 44 (in Chapter I) and Section 53 (in Chapter II)
define foreign awards, as being awards covered by arbitrations under the New
York Convention and the Geneva Convention respectively. Part II then contains
provisions for enforcement of 'foreign awards' which necessarily would be
different. For that reason special provisions for enforcement of foreign awards
are made in Part II. To the extent that Part II provides a separate definition
of an arbitral award and separate provisions for enforcement of foreign awards,
the provisions in Part I dealing with these aspects will not apply to such
foreign awards. It must immediately be clarified that the arbitration not having
taken place in India, all or some of the provisions of Part I may also get
excluded by an express or implied agreement of parties. But if not so excluded
the provisions of Part I will also apply to 'foreign awards'. The opening words
of Sections 45 and 54, which are in Part II, read 'notwithstanding anything
contained in Part I'. Such a non obstante clause had to be put in because the
provisions of Part I apply to Part II.

     ...

     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 the 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.

     ...

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

     ...

     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 are no lacunae in the said Act. This interpretation also
does not leave a party remediless. 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.

   THE STARE DECISIS OF BHATIA INTERNATIONL

   4. It appears to me that the ratio of Bhatia International does not foreclose
any further discussion on the interplay between Sections 8 and 45, or Part I and
Part II of the Arb. & Con. Act. The controversy is altogether different since
the Court was concerned with the grant of interim measures under Section 9 of
the Arb & Con. Act. In Director of Settlement, A.P. and Ors. v. M.R. Apparao and
Anr., (2002) 4 Supreme Court Cases 638, a Three Judge Bench has opined that
"Article 141 of the Constitution unequivocally indicates that the law declared
by the Supreme Court shall be binding on all courts within the territory of
India. The aforesaid Article empowers the Supreme Court to declare the law. It
is, therefore, an essential function of the Court to interpret a legislation.
The statements of the Court on matters other than law like facts may have no
binding force as the facts of two cases may not be similar. But what is binding
is the ratio of the decision and not any finding of facts. It is the principle
found out upon a reading of a judgment as a whole, in the light of the questions
before the Court that forms the ratio and not any particular word or sentence.
To determine whether a decision has "declared law" it cannot be said to be a law
when a point is disposed of on concession and what is binding is the principle
underlying a decision. A judgment of the Court has to be read in the context of
questions which arose for consideration in the case in which the judgment was
delivered. An "obiter dictum" as distinguished from a ratio decidendi is an
observation by the Court on a legal question suggested in a case before it but
not arising in such manner as to require a decision. Such an obiter may not have
a binding precedent as the observation was unnecessary for the decision
pronounced, but even though an obiter may not have a binding effect as a
precedent, but it cannot be denied that it is of considerable weight. The law
which will be binding under Article 141 would, therefore, extend to all
observations of points raised and decided by the Court in a given case". The
Constitution Bench has also reiterated the view in Islamic Academy of Education
and Anr. v. State of Karnataka and Ors., , that the ratio decidendi of a
judgment can be

   obtained only from a reading of its entirety. This is also the opinion of the
Court in Punjab National Bank v. R.L. Vaid, . In State of Gujarat v. Akhil
Gujarat Pravasi, , the Hon'ble Supreme Court has observed that "any observation
made during the course of reasoning in a judgment should not be read divorced
from the context in which they were used." Most recently, in Zee Tele Films v.
Union of India, AIR SCW 2005 2985, the Court has unequivocally declared that "a
decision is not an authority for the proposition which did not fall for its
consideration." In M/s A-One Granites v. State of U.P. and Ors., it had been
contended that the

   controversy was covered on all fours by a previous decision of the Court. The
contention was rejected in these words-

     11. This question was considered by the Court of Appeal in Lancaster Motor
Co. (London) Ltd. v. Bremith Ltd., (1941) 1 KB 675, and it was laid down that
when no consideration was given to the question, the decision cannot be said to
be binding and precedents sub silentio and without arguments are of no moment.
Following the said decision, this Court in the case of Municipal Corporation of
Delhi v. Gurnam Kaur, observed thus (at p. 43 of AIR):

     "In Gerard v. Worth of Paris Ltd. (K), (1936) 2 All ER 905 (CA), the only
point argued was on the question of priority of the claimant's debt, and on this
argument being heard, the Court granted the order. No consideration was given to
the question whether a garnishee order could properly be made on an account
standing in the name of the liquidator. When, therefore, this very point was
argued in a subsequent case before the Court of Appeal in Lancester Motor Co.
(London) Ltd. v. Bremith Ltd., (1941) 1 KB 675, the Court held itself not bound
by its previous decisions. Sir Wilfrid Greene, M.R., said that he could not help
thinking that the point now raised had been deliberately passed sub silentio by
counsel in order that the point of substance might be decided. He went on to say
that the point had to be decided by the earlier Court before it could make the
order which it did; nevertheless, since it was decided "without argument,
without reference to the crucial words of the rule, and without any citation of
authority", it was not binding and would not be followed. Precedents sub
silentio and without argument are of no moment. This rule has ever since been
followed."

     In State of U.P. v. Synthetics and Chemicals Ltd., , reiterating the same
view, this Court laid down

     that such a decision cannot be deemed to be a law declared to have binding
effect as is contemplated by Article 141 of the Constitution of India and
observed thus:

     "A decision which is not express and is not founded on reasons nor it
proceeds on consideration of issue cannot be deemed to be a law declared to have
a binding effect as is contemplated by Article 141."

     In the case of Arnit Das v. State of Bihar, , while examining the binding
effect of such a decision, this Court observed thus (Para20):

     "A decision not expressed, not accompanied by reasons and not proceeding on
a conscious consideration of an issue cannot be deemed to be a law declared to
have a binding effect as is contemplated by Article 141. That which has escaped
in the judgment is not the ratio decidendi. This is the rule of sub silentio, in
the technical sense when a particular point of law was not consciously
determined."

     12. Thus we have no difficulty in holding that as the question regarding
applicability of Rule 72 of the Rules having not been even referred to, much
less considered by this Court in the earlier appeals, it cannot be said that the
point is concluded by the same and no longer res integra and accordingly this
Court is called upon to decide the same.

   5. Therefore, the annals of the Bhatia International case (supra) would be of
relevance a consideration of which would disclose that the question before the
Apex Court was whether an injunction could be granted by an Indian Court even in
circumstances where the venue of arbitration was abroad. I had the occasion to
ponder upon this very question in Naval Gent Maritime Ltd. v. M/s. Shivnath Rai
Harnarain (I) Ltd., 2000(3) AD (Delhi) 857 : 2000(87) DLT 552. I had the
advantage of the opinion of four of my learned Brothers in Unicor Gmbh Rahn
Plastmaschinen and Anr., 1998 (47) DRJ 397, Suzuki Motor Corporation v. Union of
India and Anr., 1997 (2) Arb. LR 477, Dominent Offset Pvt. Ltd. v. Adamovske
Strojirny A.S., and Marriot

   International Inc. and Ors. v. Ansal Hotels Ltd. and Anr., 1999 VI AD (Delhi)
340 and Olex Focas Pvt. Ltd. and Anr. v. Skodaexport Company Ltd. and Anr., 2000
1 AD (DELHI) 527. The learned Judges had concluded, by disparate dialectic, that
the powers of the Court to grant injunctions under Section 9 of the Arb. & Con.
Act would also extend to `international' arbitrations. The judgment of J.B.
Goel, J. does not run counter to these views. On a holistic reading of the
Arbitration and Conciliation Act, 1996, there is no justification to read it in
compartments, and to subscribe to the view that the provisions of Part I apply
only to domestic arbitrations. To hold so would tantamount to defeating a
uniform and universal string of precedents which underscore the pivotal role of
Courts in the administration of arbitration. So long as the territorial
jurisdiction of the Court is present, relief should not be declined on
technicalities, which are not representative of any equities in favor of the
Respondents. Where the properties of the Respondent are within the jurisdiction
of this Court, the umbilical cord of territoriality is clearly visible. It would
be worthwhile to keep in perspective the decision in The Channel Tunnel Group v.
Balfour Beatty Construction Limited and Ors., (1993) 1 All ER 664, where it was
held that English Courts possessed inherent powers to grant injunctive relief
despite the fact that the seat of Arbitration was not in England, a view that
has now obtained statutory sanction in terms of the English Arbitration Act.
This is the ubiquitous view internationally. I see no reason to adopt a pedantic
approach and thereby render the legal regime in India dissimilar to that
prevailing in other parts of the world. The globe is now becoming a village, and
persons will increasing have to choose between several available forums which
may not have been available earlier due to constraints of communication. Merited
relief should not be denied so long as the choice of Court is not capricious.
The opinion of my three Learned Brothers was reversed by the Hon'ble Division
Bench in Marriott International Inc. and Ors. v. Ansal Hotels Limited and Anr.,
, holding that the Court had no power to issue interim orders under Section 9 of
the Arb. & Con. Act. in respect of arbitration proceedings which were being held
before the Kuala Lampur Regional Centre for Arbitration, which should have been
approached for this relief. It is this question of law that the Hon'ble Supreme
Court was called upon to definitively settle in the Bhatia International case
(supra). The Apex Court has thus preferred the opinion of the several single
Benches of this Court. The widest legal principle or the ratio decidendi
extractable from Bhatia International case (supra) is that provisions of Part I
of the Act apply to all arbitrations that possess statutory connectivity with
India, except where Part I has been explicitly excluded (such as in Section 45).
The ratio of Bhatia International case (supra), in my understanding, is
obviously that Section 9 of the Arb. & Con. Act can be resorted to even in
respect of international commercial arbitrations whose venue is outside India,
i.e., foreign arbitrations culminating in a 'foreign award'. Where the sittings
of an international commercial arbitration is in India, it may be termed a
'domestic arbitration'. However, there may be instances where one of the parties
is not of Indian nationality and is also not a citizen of a country which is not
a signatory either of the New York Convention or the Geneva Conventions. In
actuality the drafters have overlooked the possibility of an international
arbitration between an Indian party and another from a `non-convention' country.
This is the legislative reality and there is no reason to deduce that Parliament
wanted Part I alone to apply to such arbitrations. The relative likelihood of
arbitrations between an Indian party and one from a non-convention country (or
for that matter from a Geneva Convention country) is minuscule which is perhaps
the reason for this void. I would hazard to assess the incidence of Chapter II
of Part II of the Arb. & Con. Act being attracted or invoked is likely to be
less than ten percent. The existence of this void or lacuna leads to two
possibilities where the arbitration is in respect of a non-convention party viz.
(a) either to apply Part I or (b) to decide on a priori principles. It should
also be kept in view that there may not be any justification to equate a
situation obtaining from the failure to cater to a contract in which one party
comes from a non-convention country to every arbitration including Geneva or New
York Convention parties. It may be logically impermissible to apply/or
`extrapolate' this legal regime either to a domestic arbitration or to a New
York/Geneva Convention arbitration, which are explicitly covered by Part I and
Part II of the Arb. & Con. Act. If the arbitral sessions are located outside
India then the proceedings can be called 'non-convention arbitrations' and would
not be governed by the Arb. & Con. Act until such time as any part of an Award
passed in those proceedings is sought to be executed in India, in which event
Order XXI of the Code of Civil Procedure, 1908 would have to be resorted to. The
careless drafting which pervades most of the statute is poignantly present in
Section 2(f) which, whilst defining the term 'international commercial
arbitration', fails altogether to mention that the 'other' party must be Indian.
This has perforce to be read into the definition which regretfully adumbrates
only 'one' and not the 'other'.

   6. Mr. Sawhney's argument is that if the contract stipulates that the laws of
India shall govern the arbitral proceedings, as does Article 21 of the Joint
Venture Agreement between the parties (except in the case of BHARTI), then
regardless of the venue, they shall have the character of a domestic
arbitration, as in Section 2(7) of the Arb. & Con. Act, and its Part I and not
Part II would govern their dealings. Apart from Bhatia International (supra) he
relied very heavily on the pronouncements contained in National Thermal Power
Corporation v. The Singer Company and Ors., and on the judgment of a Division
Bench of the Gujarat High Court in Nirma Ltd. v. Lurgi Energie Und Entsorgung
GMBH, Germany and Ors., . In the NTPC case, the Apex Court held that the law of
the arbitration agreement is normally the same as the law of the contract; where
no express choice is made it would be the law of the country where the
arbitration is agreed to be held; since the parties had expressly agreed that
Indian laws would govern contractual disputes, these laws would similarly
regulate arbitral matters also. The parties in that case had also consented to
the applicability of the ICC Rules & Regulations over all matters of procedure
connected with the conduct of the arbitration. Mr. Sawhney's contention that
since the agreement in hand adverts to Indian laws, Part I of the Arb. & Con.
Act would apply to all disputes between the parties, is predicated on these
observations. It must immediately be noted that in the NTPC case the Court had
before it the repealed Arbitration Act, 1940 and Section 9(b) of the Foreign
Awards (Recognition and Enforcement) Act 1961 (hereinafter referred to `FARE
Act'), which excludes the application of the statute to 'any award made on an
arbitration agreement governed by the law of India'. In order to establish his
arguments, and to distinguish the decision of the Division Bench in General
Electric Canada Inc. and Anr. v. National Hydroelectric Power Corporation Ltd.,
2003 III AD (Delhi) 465, Mr. Chandhiok, learned Senior counsel appearing on
behalf of Plaintiff, has relied on the following paragraphs of the NTPC case
(supra).

     42. The Foreign Awards Act contains a specific provision to exclude its
operation to what may be regarded as a 'domestic award' in the sense of the
award having been made on an arbitration agreement governed by the law of India,
although the dispute was with a foreigner and the arbitration was held and the
award was made in a foreign State.

     Section 9 of this Act says:-

     "Nothing in this Act shall-

     (a) ...

     (b) apply to any award made on an arbitration agreement governed by the law
of India."

     Such an award necessarily falls under the Arbitration Act, 1940, and is
amenable to the jurisdiction of the Indian Courts and controlled by the Indian
system of law just as in the case of any other domestic award, except that the
proceedings held abroad and leading to the award were in certain respects
amenable to be controlled by the public policy and the mandatory requirements of
the law of the place of arbitration and the competent Courts of that place.

     43. It is important to recall that in the instant case the parties have
expressly stated that the laws applicable to the contract would be the laws in
force in India and that the courts of Delhi would have exclusive jurisdiction
`in all matters arising under this contract'. They have further stated that the
`Contract shall in all respects be construed and governed according to Indian
laws'. These words are wide enough to engulf every question arising under the
contract including the disputes between the parties and the mode of settlement.
It was in Delhi that the agreement was executed. The form of the agreement is
closely related to the system of law in India. Various Indian enactments are
specially mentioned in the agreement as applicable to it in many respects. The
contract is to be performed in India with the aid of Indian workmen whose
conditions of service are regulated by Indian laws. One of the parties to the
contract is a public sector undertaking. The contract has in every respect the
closest and most real connection with the Indian system of law and it is by that
law that the parties have expressly evinced their intention to be bound in all
respects. The arbitration agreement is contained in one of the clauses of the
contract, and not in a separate agreement. In the absence of any indication to
the contrary, the governing law of the contract (i.e. in the words of Dicey, the
proper law of the contract) being Indian law, it is that system of law which
must necessarily govern matters concerning arbitration, although in certain
respects the law of the place of arbitration may have its relevance in regard to
procedural matters.

     In order to make good his submission Mr. Chandhiok has drawn attention to
Section 51 of the Arb. & Con. Act which only incorporates Section 9(a) of the
FARE Act. Therefore, the NTPC case (supra) may not have any direct application
to the facts of the present case. There is obvious substance in his argument
that because of the deliberate omission of Section 9(b) of the FARE Act the
legislature has consciously altered the position away from the choice of law and
towards the venue of arbitration. Once this conclusion is arrived at since the
venue of the Arbitration is outside India and is governed by the New York
Convention, Part II Chapter I alone can be invoked by the present parties.
Section 9 of the FARE Act and Section 51 of the Arb. & Con. Act are reproduced
in juxtaposition for facility of comparison:

     Section 9 of the FARE Act

     Section 51 of the Arb. & Con. Act

     Saving.--Nothing in this act shall-

     (a) prejudice any rights which any person would have had of enforcing in
India of any award or of availing himself in India of any award if this Act had
not been passed; or

     (b) apply to any award made on an arbitration agreement governed by the law
of India.

     Saving.--Nothing in this Chapter shall prejudice any rights which any
person would have had of enforcing in India of any award or of availing himself
in India of any award if this Chapter had not been enacted.

   7. The question before the Apex Court in Sumitomo Heavy Industries Ltd. v.
ONGC Ltd. and Ors., , was whether consequent upon the Award having been
published by the Arbitral Tribunal whose proceedings had been conducted in
London and were governed by the Rules and Procedure of the International
Chambers of Commerce, a petition under Section 14 of the Arbitration Act, 1940
to file the Award in the Bombay High Court was maintainable. The Hon'ble Supreme
Court clarified that in the duration of the arbitral proceedings the curial law
in London would hold sway, but once the Award had been published, since its
enforcement was sought in India the Petition would be maintainable. It opined
that "the courts administering the curial laws have the authority to entertain
applications by parties to arbitrations being conducted within their
jurisdiction...". It had also been observed that Section 9 of the FARE Act did
not apply to the parties. The general principle that is extractable from this
decision is that there has been a shift towards the venue determining the curial
law which has to be applied.

   8. Mr. Sawhney has also relied heavily on the decision of the Division Bench
in Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany and Ors., , in which
the Trial Court had rejected the

   prayer to set aside the "first partial award" of the International Court of
Arbitration for the reason that it "could not be said to be an interim or
partial award for the purpose of Section 34 of the Act." The Division Bench had
noted that the parties had contractually consented that their Agreement shall be
governed according to laws of India. It repelled the argument that since the
Award was a product of an international commercial arbitration the challenge to
it stood waived. The Division Bench held inter alia that - "The decisive factor
for an award to be considered a "domestic award" is not the place where it is
made but rather the fact of it being made under Part I of the Act. The parties
in the instant case having agreed that the agreement (including the arbitration
there under) shall be governed according to the laws of India, the arbitral
award has to be held to have been made under Part I and has to be considered as
a domestic award, though made on foreign soil according to the ICC Rules and
Procedure - which can only displace the derogable provisions of Part I.
Therefore, the recourse to a Court under Section 34, it not being a derogable
provision, cannot be said to have been waived by subscribing to the ICC Rules of
Arbitration". With utmost respect I am unable to concur with this interpretation
of the law; possibly, the Bench was influenced by the opinion of Lord Denning in
International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co KSC, [1975] 1 ALL
ER 242 (CA), which indubitably would have been relevant had Section 9(b) of the
FARE Act been `saved' by Section 51 of the Arb. & Con. Act. In paragraph 9 of
this detailed judgment, the Division Bench has commented that the UNCITRAL Model
Law does not state to which international commercial arbitrations it would
apply. Most significantly it also noted that the Working Group was in favor of
strict territorial criterion, but that it was not expressly dealt with. Again,
with great trepidation and in all humility, it is my understanding that Article
I of the New York Convention, which is referred to in Section 44 of the Arb. &
Con. Act, without adverting conjointly to Section 9(b) of FARE Act and Section
51 of the Act, leaves no manner of doubt that the territorial/venue nexus has
now come to be accepted.

     ARTICLE 1

     This Convention shall apply to the recognition and enforcement of arbitral
awards made in the territory of a State other than the State where the
recognition and enforcement of such awards are sought, and arising out of
differences between persons, whether physical or legal. It shall also apply to
arbitral awards not considered as domestic awards in the State where their
recognition and enforcement are sought.

     2. The term 'arbitral awards' shall include not only awards made by
arbitrators appointed for each case but also those made by permanent arbitral
bodies to which the parties have submitted.

     3. When signing, ratifying or acceding to this Convention, or notifying
extension under article X hereof, any State may on the basis of reciprocity
declare that it will apply the Convention to the recognition and enforcement of
awards made only in the territory of another Contracting State. It may also
declare that it will apply the Convention only to differences arising out of
legal relationships, whether contractual or not, which are considered as
commercial under the national law of the State making such declaration.'

   9. As in the Singer case (supra) the decision of the Hon'ble Supreme Court in
Dresser Rand S.A. v. K.G. Khosla Compressors Ltd. and Ors., (1994) 1 Arbitration
Law Reporter 506, would not apply to the Arb. & Con. Act. In this analysis the
conclusion appears to be that there are no precedents which are directly
applicable to the legal conundrum before me.

   Extent of the Jurisdiction of Civil Courts

   10. Section 5 of the Arb. & Con. Act prescribes that notwithstanding anything
contained in any other law no judicial authority shall intervene in any matter
governed by Part I except where so provided therein. Section 5 does not state
that civil courts shall have no role to play in arbitration matters, as it could
easily have done. In Dhulabhai etc. v. State of Madhya Pradesh and Anr., , it
has been opined by the Constitution Bench that 'the jurisdiction of civil courts
is all embracing except to the extent it is excluded by an express provision of
the law or by clear intendment arising from such law.' After discussing all the
ramifications of the statute law and its previous pronouncements the following
legal propositions were enunciated-

     "The result of this inquiry into the diverse views expressed in this Court
may be stated as follows:

     (1) Where the statute gives a finality to the orders of the special
tribunals the civil court's jurisdiction must be held to be excluded if there is
adequate remedy to do what the civil courts would normally do in a suit. Such
provision, however, does not exclude those cases where the provisions of the
particular Act have not been complied with or the statutory tribunal has not
acted in conformity with the fundamental principles of judicial procedure.

     (2) Where there is an express bar of the jurisdiction of the court, an
examination of the scheme of the particular Act to find the adequacy or the
sufficiency of the remedies provided may be relevant but is not decisive to
sustain the jurisdiction of the civil court.

     Where there is no express exclusion the examination of the remedies and the
scheme of the particular Act to find out the intendment becomes necessary and
the result of the inquiry may be decisive. In the latter case it is necessary to
see if the statute creates a special right or a liability and provides for the
determination of the right or liability and further lays down that all questions
about the said right and liability shall be determined by the tribunals so
constituted, and whether remedies normally associated with actions in civil
courts are prescribed by the said statute or not.

     (3) Challenge to the provisions of the particular Act as ultra vires cannot
be brought before Tribunals constituted under that Act. Even the High Court
cannot go into that question on a revision or reference from the decision of the
Tribunals.

     (4) When a provision is already declared unconstitutional or the
constitutionality of any provision is to be challenged, a suit is open. A writ
of certiorari may include a direction for refund if the claim is clearly within
the time prescribed by the Limitation Act but it is not a compulsory remedy to
replace a suit.

     (5) Where the particular Act contains no machinery for refund of tax
collected in excess of constitutional limits or illegally collected a suit lies.

     (6) Questions of the correctness of the assessment apart from its
constitutionality are for the decision of the authorities and a civil suit does
not lie if the orders of the authorities are declared to be final or there is an
express prohibition in the particular Act. In either case the scheme of the
particular Act must be examined because it is a relevant enquiry.

     (7) An exclusion of the jurisdiction of the civil court is not readily to
be inferred unless the conditions above set down apply."

   In paragraph 15 of Bhatia International case (supra) Hon'ble Justice S.N.
Variava has remarked with reference to Civil Courts that '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'. In I.T.I. Limited v. Messrs Siemens Public Communications Network
Limited, AIR 2000 SC 2308, Hon'ble Mr. Justice Santosh Hegde has similarly
observed that it is well settled that the jurisdiction of the Civil Court can
only be taken away by a statute in specific terms; that such exclusion cannot be
easily inferred because there is always a strong presumption that civil courts
have jurisdiction to decide all questions of a civil nature. The Court found
that the High Court possessed revisory powers under Section 115 of the CPC even
in respect of an Appeal under Section 37 of the Act. These very same views have
also been articulated in the judgment of Hon'ble Justice R.C. Lahoti (as the
Learned Chief Justice of India then was) in Ramesh Chand Ardawatiya v. Anil
Panjwani, . Finally, the following pronouncements in Sukanya Holdings (P)
Limited v. Jayesh H. Pandya and Anr., are also of equal relevance:

     "For interpretation of Section 8, Section 5 would have no bearing because
it only contemplates that in the matters governed by Part I of the Act, the
judicial authority shall not intervene except where so provided in the Act.
Except Section 8, there is no other provision in the Act that in a pending suit,
the dispute is required to be referred to the arbitrator. Further, the matter is
not required to be referred to the Arbitral Tribunal, if: (1) the parties to the
arbitration agreement have not filed any such application for referring the
dispute to the arbitrator; (2) in a pending suit, such application is not filed
before submitting first statement on the substance of the dispute; or (3) such
application is not accompanied by the original arbitration agreement or duly
certified copy thereof. This would, therefore, mean that the Arbitration Act
does not oust the jurisdiction of the civil court to decide the dispute in a
case where parties to the arbitration agreement do not take appropriate steps as
contemplated under sub-sections (1) and (2) of Section 8 of the Act".

   11. The controversy before the Hon'ble Supreme Court in Konkan Railway
Corporation Limited and Anr. v. Rani Construction Private Limited, , revolved
around Section 11 of the Arb. & Con. Act. Therefore, Mr. Sawhney is not
justified in relying on the observations made in paragraph 21 therein that there
would be no impediment in the Arbitral Tribunal holding that it had been wrongly
constituted by the Court since thirty days had not expired, in order to support
his contention that the jurisdiction of the Civil Court is completely ousted.
The decision does not hold that a Civil Court is barred from setting aside an
administrative order of the Hon'ble Chief Justice on this short ground. Section
5 of the Arb. & Con. Act could have explicitly ousted the jurisdiction of Civil
Courts, but fails to do so. On the contrary, Section 8 of the Arb. & Con. Act
preserves it, since a suit can/must continue unless the application envisaged in
this provision has been preferred. Sections 8, 45 and Article II (3) of New York
Convention are put in juxtaposition below:

     Section 8

     Section 45

     ARTICLE II(3)

     Power to refer parties to arbitration where there is an arbitration
agreement.- (1) A judicial authority before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a party so
applies not later than when submitting his first statement on the substance of
the dispute, refer the parties to arbitration.

     (2) The application referred to in sub-section (1) shall not be entertained
unless it is accompanied by the original arbitration agreement or a duly
certified copy thereof.

     (3) Notwithstanding that an application has been made under sub-section (1)
and that the issue is pending before the judicial authority, an arbitration may
be commenced or continued and an arbitral award made.

   Power of judicial authority to refer parties to arbitra- tion.-
Notwithstanding anything contained in Part I or in the Code of Civil Procedure,
1908 (5 of 1908), a judicial authority, when seized of an action in a matter in
respect of which the parties have made an agreement referred to in section 44,
shall, at the request of one of the parties or any person claiming through or
under him, refer the parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of being performed.

   The Court of a contracting State when seized of an action in a matter in
respect of which the parties have made an agreement within the meaning of this
article, shall, at the request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is null and void,
inoperative and incapable of being performed.

   From a plain reading of the provisions it is clear that Section 8 comes into
operation wherever a contract contains an arbitration clause whereas Section 45
is attracted when the matter is the subject of a New York Convention arbitration
agreement. Their language is different. Section 8 envisages the filing of an
application by the party seeking Reference whereas Section 45 of the Arb. & Con.
Act expects only a `request' for this purpose. However the most important facet
of difference is that no adjudication is envisaged in Section 8 whereas Section
45 contemplates the returning of a judicial finding that the agreement to
arbitrate has not become inoperative or non-performable in the interregnum. The
wording of Article II (3) of the New York Convention has also been departed
from, in that Section 45 commences with a non-obstante and thereafter adopts the
same language. Mr. Sawhney's argument to the effect that Section 45 has no
application to the present dispute flies in the face of these exclusionary
words, which have the effect of creating a further fascicule in the statute
precluding the operation of all its other provisions. Therefore, there is no
room for applying Part I of the Arb. & Con. Act where the New York Convention is
specifically attracted, as per Section 45. The Supreme Court considered the
effect of such words in Hari Singh v. State of U.P. . Its opinion leaves no
doubt that Part I of the Arb. & Con. Act should be ignored wherever the New York
Convention is applicable.

   Section 70, so far as is relevant, says 'the provisions of the Factories Act
shall, notwithstanding anything contained in that Act, apply to all persons
employed in and in connection with a factory'. It is well-known that a non
obstante clause is a legislative device which is usually employed to give
overriding effect to certain provisions over some contrary provisions that may
be found either in the same enactment or some other enactment, that is to say,
to avoid the operation and effect of all contrary provisions. Thus the non
obstante clause in Section 70, namely, "notwithstanding anything in that Act"
must mean notwithstanding anything to the contrary contained in that Act and as
such it must refer to the exempting provisions which would be contrary to the
general applicability of the Act. In other words, as all the relevant provisions
of the Act are made applicable to a factory notwithstanding anything to the
contrary contained in it, it must have the effect of excluding the operation of
the exemption provisions. Just as because of the non obstante clause the Act is
applicable even to employees in the factory who might not be 'workers' under
Section 2(1), the same non obstante clause will keep away the applicability of
exemption provisions qua all those working in the factory. The Labour Court, in
our view, was, therefore, right in taking the view that because of the non
obstante clause Section 64 read with Rule 100 itself would not apply to the
respondents and they would be entitled to claim overtime wages under Section 59
of that Act read with Section 70 of the Bombay Shops and Establishments Act,
1948.

   12. The syntax and components of Parts I and II make them wholly dissimilar
and entirely incomparable, leaving no room for doubt that domestic arbitration
and New York Convention arbitrations are governed by distinct legal regimes.
Section 8 read in conjunction with Sections 5 and 16 of the Arb. & Con. Act
prohibits interference by a Civil Court. The non-obstante in Section 45, as also
its language which should be interpreted with the assistance of the New York
Convention, expects a Court to be satisfied that the agreement has not become
null and void, inoperative or incapable of being performed, before the Court can
accede to the request of any person to make a Reference. Sections 34 and 48 of
Arb. & Con. Act and Article V of New York Convention are reproduced in
juxtaposition:

     Section 34

     Section 48

     ARTICLE V

     Application for setting aside arbitral award.--(1) Recourse to a court
against an arbitral award may be made only by an application for setting aside
such award in accordance with sub-section (2) and sub-section (3).

     (2) An arbitral award may be set aside by the court only if--

     (a) the party making the application furnishes proof that--

     (i) a party was under some incapacity; or

     (ii) the arbitration agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law for
the time being in force; or

     (iii) the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or Conditions for enforcement of foreign
awards.--(1) Enforcement of a foreign award may be refused, at the request of
the party against whom it is invoked, only if that party furnishes to the court
proof that --

     (a) the parties to the agreement referred to in section 44 were, under the
law applicable to them, under some incapacity, or the said agreement is not
valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made; or

     (b) the party against whom the award is invoked was not given proper notice
of the appointment of the arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or

     1. Recognition and enforcement of the award may be refused, at the request
of the party against whom it is invoked, only if that party furnishes to the
competent authority where the recognition and enforcement is sought, proof
that--

     (a) the parties to the agreement referred to in article II were, under the
law applicable to them, under some incapacity, or the said agreement is not
valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the award was made; or

     (b) the party against whom the award is invoked was not given proper notice
of the appointment of the arbitrator or of the arbitral

     (iv) the arbitral award deals with a dispute not contemplated by or not
falling within the terms of the submission to arbitration, or it contains
decisions on matters beyond the scope of the submission to arbitration:

     Provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to arbitration may be set
aside; or

     (v) the composition of the arbitral tribunal or the arbitral procedure was
not in accordance with the agreement of the parties, unless such agreement was
in conflict with a provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Part;

     or

     (c) the award deals with a difference not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration:

     Provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be enforced; or

     (d) the composition of the arbitral authority or the arbitral procedure was
not in accordance with the agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country where the arbitration took
place; or

     (e) the award has not yet become binding on the parties, or has been set
aside or suspended by a competent authority proceedings or was otherwise unable
to present his case; or

     (c) the award deals with a difference not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration; provided that, if the
decisions on matters submitted to arbitration can be separated from those not so
submitted, that part of the award which contains decisions on matters submitted
to arbitration may be recognised and enforced; or

     (d) the composition of the arbitral authority or the arbitral procedure was
not in accordance with the agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country where the arbitration took
place; or

     (b) the court finds that--

     (i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force or,

     (ii) the arbitral award is in conflict with the public policy of India.

     Explanation.-- Without prejudice to the generality of sub-clause(ii), it is
hereby declared, for the avoidable of any doubt, that an award is in conflict
with the public policy of India if the making of the award was induced or
affected by fraud or corruption or was in violation of section 75 or section 81.

     (3) An application for setting aside may not be made after three months
have elapsed from the date on which the party making that application had
received the arbitral award or, if a request had been made under section 33,
from the date on which that request had been disposed of by the arbitral
tribunal.

     Provided that if the court is satisfied that the applicant was prevented by
sufficient cause from making the application within the said period of three
months it may entertain the application within a further period of thirty days,
but not thereafter. of the country in which, or under the law of which, that
award was made.

     (2) Enforcement of an arbitral award may also be refused if the court finds
that--

     (a) the subject-matter of the difference is not capable of settlement by
arbitration under the law of India; or

     (b) the enforcement of the award would be contrary to the public policy of
India.

     Explanation.--Without prejudice to the generality of clause (b) of this
section, it is hereby declared, for the avoidance of any doubt, that an award is
in conflict with the public policy of India if the making of the award was
induced or affected by fraud or corruption.

     (e) the award has not yet become binding on the parties, or has been set
aside or suspended by a competent authority of the country in which, or under
the law of which, that award was made.

     2. Recognition and enforcement of an arbitral award may also be refused if
the competent authority in the country where recognition and enforcement is
sought finds that--

     (a) the subject-matter of the difference is not capable of settlement by
arbitration under the law of that country; or

     (b) the recognition or enforcement of the award would be contrary to the
public policy of that country

     4. On receipt of an application under sub-section (1), the court may, where
it is appropriate and it is so requested by a party, adjourn the proceedings for
a period of time determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take such other action as
in the opinion of arbitral tribunal will eliminate the grounds for setting aside
the arbitral award.

     (3) If an application for the setting aside or suspension of the award has
been made to a competent authority referred to in clause (e) of sub-section (1)
the court may, if it considers it proper, adjourn the decision on the
enforcement of the award and may also, on the application of the party claiming
enforcement of the award, order the other party to give suitable security.

   13. Arbitration, as a recognized and acceptable method of dispute resolution,
is less than a century in age. At the commencement of the repealed Arbitration
Act, 1940 there must have been considerable uncertainty as to how arbitration
would be received; its development could not be precisely predicted but
empirical data shows that it has it has surpassed all expectations. Arbitration
was then at the embryonic stage that `conciliation' is presently at. The reality
is that today almost every commercial contract prescribes that if disputes arise
they must be resolved through arbitration. Several national and international
organisations are now in existence through whose aegis arbitration can be
conducted. The Indian Council of Arbitration (ICA) as also various trade,
chambers of Commerce and/or business organisations at the Central and State
level have a panel of accomplished arbitrators as also the requisite
infrastructure for conducting arbitration. The International Court of
Arbitration is one of many bodies, which is specifically named by contracting
parties for completing arbitration. These bodies have attained specialisation to
such an extent that they have promulgated their own rules of procedure much like
curial law. No contact with courts of law is necessary, until one of the parties
recalcitrantly refuses to honour an Award thereby necessitating steps for its
execution. There is therefore scant need to prescribe the powers and procedure
pertaining to arbitration in the commercial world. This eventuality usually
arises where the parties are individuals and arbitration is through the
intervention of a Court. Chapters III to VI of Part I of the Arb. & Con. Act
could well be otiose even for domestic commercial arbitration. These provisions
would guide the parties and the arbitrators who have a first time involvement
with arbitration. In this analysis it will become plain that Chapters I and II
of Part II of the Arb. & Con. Act are complete codes in themselves, akin to
Section 25B of the Delhi Rent Control Act in respect of both curial and
substantive law pertaining to the arbitration. If this understanding is correct
it would no longer be necessary to locate the power for issuing interim orders
within the Arb. & Con. Act; Section 9 dealing with domestic arbitrations would
become clarificatory in character.

   14. So far as Civil Courts are concerned it is not necessary for them to
trace their powers to issue injunctions to a statute; in common law systems the
reverse is oftentimes observed. To mention only a few examples, the principles
laid down in Ryland v. Fletcher, Donoghue v. Stevenson, Central London Property
Trust Ltd. v. High Trees House Ltd., 1947 K.B. 130 : [1956] I All ER 256 (now
known simply as High Trees in which the principle of promissory estoppal was
established) and Mareva v. International Bulk Carriers, (1980) 1 All ER 213
(thenceforward 'Mareva injunction' has become a term of art) have in fact acted
as catalysts for statutory activity. Civil Courts in common-law countries have a
duty, which cannot be deferred, postponed or procrastinated, to decide every
dispute brought before it. If no legislation is in existence the lies must be
decided on first principles. The Channel Tunnel case (supra) is significant for
several reasons including the reiteration by the House of Lords that the Court
had power pursuant to its inherent jurisdiction to grant a stay of an action
brought before it in breach of an agreed method of resolving disputes.

   15. The "United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (New York, 10 June, 1958)", the New York Convention in
common legal parlance, has been ratified by India of 13th July, 1960. By virtue
of its Article VII the Geneva Protocol on Arbitration Clauses of 1923 and the
Geneva Convention on the execution of Foreign Arbitral Awards of 1927 ceases to
have effect between the contracting States. Considering that the New York
Convention has been ratified by 108 nations and less than five sovereign
contracting states of the Geneva Convention have not become signatories to the
New York Convention, Chapter II of Part II of the Arb. & Con. Act already has
minimal applicability and may soon have none at all, reducing that Chapter to a
surplasage. Article 51 of the Constitution of India, which is a Directive
Principles of State Policy, expects the promotion of international peace and
security and once a Treaty is ratified by India it becomes its duty to ensure
that appropriate legislation is passed so that the Treaty has municipal/domestic
applicability and efficacy. For example the Warsaw and Hague Conventions
regulating International Carriage by Air has been infused with local
applicability upon the passing of the Carriage by Air Act. Unlike in the Arb. &
Con. Act, the language of those Conventions has not been tampered with or
altered whilst enacting the Carriage by Air Act. It is certainly arguable that
the language employed in any Treaty should similarly be employed verbatim in the
municipal statute, since every nation is obliged to give complete effect to its
international obligations. It is not expected of any sovereign country to lead
the international community to believe that it has agreed to fall within a
particular legal regime, whilst chartering a different path in reality. If the
same language as is found in a ratified treaty is employed in a stature,
inconsistency is obviated.

   WAIVER OF ARBITRATION CLAUSE IN PART I

   16. Section 8 of the Arb. & Con. Act introduces into the statute the doctrine
of election of remedies, i.e., the resolution of disputes either through
arbitration or through civil action. In Food Corporation of India v. Sreekanth
Transport, , the FCI had filed a civil suit despite the existence of an
exclusion clause in the Agreement. The Apex Court took the view that FCI had
relinquished or abandoned its right of proceedings pursuant to the said clause.
The decision in Magna Leasing Limited v. NEPC Micon Limited and Anr., has
already been relied upon by me in Raj & Associates and Anr. v. Videsh Sanchar
Nigam Limited and Ors., 2004 (2) Arb. L.R. 614 (VSNL case). The situation turned
out to be the reverse of that which is normally encountered; the Plaintiff had
filed a suit which it subsequently attempted to withdraw with the intention of
pursuing its remedy through arbitration. The second Defendant, RITES, had
invoked Section 8, whilst simultaneously objecting to its impleadment on the
strength of Section 230 of the Contract Act, and its contention had been upheld.
VSNL had filed a Counter Claim, and the Plaintiff was refused leave to
conditionally withdraw the suit, observing that it had elected not to take
recourse to arbitration for adjudication of its claims. My attention had not
been drawn to the fortifying opinion of the Division Bench in Pran Nath Panjan
v. State of Jammu & Kashmir, AIR 1972 J & K 11, found in these words -

     "But where the party himself chooses to invoke the jurisdiction of the
civil court, submits to it, does not avail of the arbitration clause ... he
cannot afterwards claim the benefit of the arbitration clause and ask the Court
to enforce the said clause against the second party".

   17. Section 8 of the Arb. & Con. Act came up for consideration in P. Anand
Gajapathi Raju and Ors. v. P.V.G. Raju (Dead) and Ors., and it was laid down
that the party seeking to

   enforce the arbitration clause must file/move an application for this
purpose. This is also the expressed view of the Apex Court in Sukanya Holdings
(Supra). In Sudarshan Chopra and Ors. v. Company Law Board and Ors., 2004(2)
Arb. L.R. 241(P&H) (DB) the Division Bench of the Punjab & Haryana High Court
rejected the argument that the Arbitrator alone was competent under Section 16
of the Arb. & Con. Act to opine on the existence of an arbitration agreement. It
also appears that the Court thought it necessary to file a formal application
under Section 8 of the Arb. & Con. Act. In Global Marketing Direct Limited v.
GTL Limited and Anr., 2004(3) Arb. L.R. 56 (Bombay) the learned Judge had noted
the need to file an application under Section 8 where Part I of the Arb. & Con.
Act applied whilst recording that there was no such formality in Section 45. It
was also observed that the civil court would continue to have jurisdiction until
it decided that issue. Reliance on Food Corporation of India and Anr. v. Yadav
Engineer and Contractor, AIR 1982 SC 1302, may have become anachronistic since
the wordings of this Section are dissimilar to those employed in Section 34 of
the Arbitration Act, 1940; the former speaks of a "first statement on the
substance of the dispute" whilst the latter had referred to the "written
statement" and sub-section (2) of the former explicitly contemplates an
"application". It is obvious that the Court was not satisfied that a case for
its interference had been made out in Brawn Laboratories Limited v. Fittydent
International GMBH and Anr., , which conversely implies that where a case is

   disclosed the court can interfere in the arbitration proceedings. In Akshay
Kapur and Ors. v. Rishav Kapur and Ors., , I have expressed the opinion that on
the filing of a Section 8 application this Section would apply only if the suit
is directly covered by the arbitration clause. I had entertained the suit for
declaration and injunction pertaining to a Valuation Report as it was distinct
from the disputes that were to be decided through the aegis of arbitration. In
Vijay Vishwanath Talwar v. Mashreq Bank, PSC and Ors., , my learned Brother R.C.
Chopra, J. has similarly declined to dismiss a civil suit in respect of an
arbitration clause which allegedly had been agreed to under duress and coercion.
In Jagson International Ltd. v. Frontier Drilling, Chopra, J. similarly
dismissed an application under Order XXXIX of the CPC, allowed the Defendant's
application under Section 45 of the Arb. & Con. Act, after observing that the
difference in the language of that Section and Section 8 was conspicuous and was
of significance. My learned Brother was of the opinion that a party should not
be blindly sent to a foreign land until the Arbitration Agreement was found not
to be null and void, inoperative or incapable of being performed. On facts it
was found that the Plaintiff was attempting to wriggle out of the Arbitration
commitment on frivolous grounds. This conclusion was arrived at after
consideration of the decision of the Apex Court in Ganpati Raju (supra),
Pinkcity (supra), Sukanya (supra); and Haryana Telecom Ltd. v. Sterlite
Industries (India) Ltd., , in which it has been opined that Section 8 of the
Arb. & Con. Act envisages the reference to the Arbitrator of only those disputes
which the Arbitrator is competent or empowered to decide. In Shivnath Rai Har
Narain v. Italgrani Spa, , it has held that where the factum of existence of the
agreement is in dispute this question should be decided by the Court as a
preliminary issue whenever Part II of the Arb. & Con. Act is attracted. If
enquiries of this nature are envisaged in Section 8, a fortiori it is mandatory
under Section 45 of the Arb. & Con. Act. Whereas in the former the Court's
scrutiny should be calculated to return a prima facie finding, in the latter it
should be in greater detail, short of deciding contentious issues of fact going
to the root of the disputes.

   18. At the close of arguments on 22.7.2005 Learned Counsel for the contesting
Defendant has cited two decisions in support of his contentions. In GTC Limited
v. Royal Consulting "R.V., 2003 (5) LJ SOFT 113 : 2003 (2) ALL MR 608 the
Learned Judge has in terms voiced the opinion that even under the Arb. & Con.
Act if the parties acquiesce in the proceedings by not availing of the procedure
set down in Section 8 or Section 45 or Section 54, the jurisdiction of the Civil
Court will not be ousted. A distinction was then drawn between the provisions of
Part I and Part II with the observation that that a Civil Court will direct the
parties to an International arbitration only if it concludes that a valid
agreement is in existence. This decision militates against the contesting
Defendant and supports the interpretation taken by the Delhi High Court. The
second decision is of a Division Bench of the Calcutta High Court titled
Hindustan Copper Limited v. Centro trade Minerals and Metals Inc., . Hindustan
Copper Ltd. had been directed by the Learned Single Judge to make payments
against a foreign Award failing which execution proceedings would be initiated.
The Division Bench noted that there was no Decree passed by any Court of law;
however, an Award had been passed by an Arbitrator sitting in England in which
he had not made any observations or alterations to the Indian Award. The issue
was whether the Award, being a foreign Award, left the court with Lesser powers
of enforcement. It was clarified that a foreign Award "is no more binding and no
more sacrosanct than a domestic Award which has either not been set aside or has
passed the test of challenge before an Indian Court". It was also the opinion of
the Division Bench that the legal position in India and England is different. It
was noted that the provisions of the English Arbitration Act, 1996 were
attracted only where the seat of arbitration was in England or Wales or Northern
Ireland. It should immediately be noted that the sites/or venue of the
Arbitration as against the applicable law has thus been recognized. The other
issue that had arisen was whether the London Award was a foreign award within
the purview of Section 44 of the Arb. & Con. Act. It will at once become clear
that the facts and issues necessary for the decision in that case are totally
dissimilar to those that exist in the case in hand, where the enforcement of a
foreign award is not the question. It was in this context that the NTPC case
(supra) had been referred to. The Court did not find any significance in the
dropping of Section 9(b) of the FARE Act, although Bhatia International case
(supra) was cited it was found not to be relevant since Section 9(b) of FARE Act
did not come into play whereas it was Section 9 and the powers to grant
interlocutory relief that was under scrutiny. It was in those circumstances that
the Bench came to the view, with which I respectfully differ, that the venue of
arbitration determining the competency of the Court "has not yet found place in
Indian law". The Division Bench expressed the view that the effect of the
deletion of sub-section (b) from Section 9 of the FARE Act was that "the Court
is now compelled to see on its own, even if the proper law of the contract is
Indian law, whether the Indian Courts would have jurisdiction to set aside the
Award made on foreign soil". The decision in that case, however, is that the
Award published in England was not a foreign Award and accordingly was not
enforceable under Part II. This precedent also does not definitively advance the
case of the Respondents.

   19. In summation, in every Arbitration governed by the New York Convention,
Part II Chapter I shall have to be applied, notwithstanding the provisions of
Part I. In these cases it is the venue of the arbitration that is conclusive
whilst an application must be filed in Part I arbitrations to halt civil
proceedings, this is not necessary where Part II comes into operation. However,
in the latter case the Court must adjudicate whether the arbitration clause is
not null and void but is operational and capable of being performed, and only
after it arrives at this conclusion, can it refer the parties to arbitration.
The deliberate decision not to incorporate Section 9(b) of FARE assumes great
significances, and leads inexorably to the conclusion that the factum of Indian
laws in the 1996 Arbitration regime, especially Part II thereof,
venue/territoriality is all important.

   RELEVANT FACTS OF THE CASE

   20. I shall now venture onto the factual matrix of the case. SKYCELL
Communication Pvt. Limited was incorporated on 3.3.1992, with the following
holding:- Crompton Greaves Ltd. (CGL) 40.5%, MILLICOM and BELLSOUTH 24.5.% each
and the Defendant 10.5%. The Joint Venture Agreement (JVA) stipulated that new
shareholders would be invited only with the express written consent of these
partners, each of whom would have a preemptive right to purchase the shares of
any of the partners desirous of selling their shareholding. Furthermore, in
order to ensure that each of the partners had a meaningful say in the Joint
Venture, the prescribed quorum mandated the representation and affirmative vote
of each of the partners. Clause 21 of J.V.A. contains the Arbitration Agreement
to refer all disputes to the ICC. The Joint Venture Agreement also declares that
it would be governed by the laws of India, which Mr. Sawhney has construed to
indicate that Part-I to the exclusion of Part-II of the Arb. & Con. Act applies
to every dispute between the parties. In October/November, SKYCELL issued
notices to each of the partners seeking their consent for the sale of the shares
of CGL and the Defendant No. 1 to the Plaintiff. On 25.11.1999 CGL appears to
have entered into an Agreement for the sale of its equity in SKYCELL to the
Plaintiff. On 9.12.1999 BELLSOUTH declined to give its consent to the proposed
sale of the equity held by CGL as well as Defendant No. 1 to the Plaintiff and
notified all the partners to commence arbitration in terms of its letter dated
31.1.2000. The following day i.e. 1.2.2000 BELLSOUTH filed an application under
Section 9 of the Arb. & Con. Act in the Madras High Court praying for an order
restraining CGL from transferring its shares in SKYCELL. On 29.3.2000 Defendant
No. 1 filed a suit before the Addl. District Judge, Delhi praying firstly for a
Decree of Permanent Injunction restraining CGL from selling its shareholding in
SKYCELL except in accordance with the Articles of Association, and secondly, for
a decree of permanent injunction restraining SKYCELL from registering any
proceedings or transaction pertaining to these shares. This Suit was eventually
dismissed on 4.8.2003 on the grounds that the shares had already been
transferred. In the proceedings before the Madras High Court in OMP Nos.
19515/2000 & 19516/2000, the learned Judge has made the following observations
which are being reproduced in order to buttress the opinion that if a Court
blindly refers parties to arbitration, ignoring their conduct, grave injustice
may result. "Satwant Singh appears to be a seasoned litigant and not a fair
litigant. He resorted to the Court of Additional District Judge at Delhi in
March 2000 to aid BELLSOUTH's efforts and give it a second line to fall back on
in the event this Court vacating the injunction against CGL. He did not disclose
these proceedings to SKYCELL, CGL or BHARTI till 26.8.2000 when he wanted to
rely on another order from the same court obtained behind their back to stall
the confirmation of CGL's sale to BHARTI." Meanwhile on April 6, 2000 the Madras
High Court had passed Orders on the Section 9 petition inter alia maintaining
status quo for four months and in the event that the parties failed to arrive at
an amicable settlement, permitted the parties/partners to initiate arbitration
proceedings. On August 5, 2000 the Plaintiff filed Suit No. 1727/2000 in this
Court praying for an injunction against BELLSOUTH from selling its shares to any
person except the Plaintiff. Suit No. 957/2000 of similar nature was filed by
the Plaintiff in this Court on 5.9.2000 praying that Defendant No. 1 be
restrained from selling its shares except to the Plaintiff. On 27.9.2000 the
Plaintiff filed a third suit in this Court, Suit No. 2202/2000, claiming that it
had stepped into the shoes of CGL and accordingly praying for an injunction
restraining the other partners from acting in breach of the Joint Venture
Agreement.

   21. The affected partners, namely, the Defendants unsuccessfully filed an
applications under Section 45 of the Arb. & Con. Act seeking a reference of the
disputes to arbitration, but these applications were dismissed vide Orders dated
15.5.2001. In those proceedings Defendant No. 1 had "declared in unequivocal
terms that the Plaintiff is not a party to the Joint Venture Agreement (JVA) and
there is no agreement between the Plaintiff on the one hand and Defendant Nos.
1, 2, 3 and 5 on the other hand." It was held that since the privity of contract
had not been accepted by the Defendants with Bharti (the Petitioner herein) the
objection to the Suit not been maintainable was devoid of merit. This Suit was
eventually dismissed as withdrawn on 21.11.2001. This Order has not been
appealed against and, therefore, operates as res judicata. Almost five months
later, on 9.10.2000, Defendant No. 1 issued a notice to the other partners
including the Plaintiff for commencing arbitration proceedings. On 2.11.2000 CGL
filed Suit No. 884/2000 pleading therein that all disputes had been settled and
that the Joint Venture partners had abandoned arbitration wherein the Hon'ble
Single Judge of the Madras High Court vacated the interim stay and dismissed the
application seeking restraint Orders from initiating arbitration proceedings on
March 16, 2001. These Orders were assailed before the Division Bench of that
Court. On 15.5.2001 the application under Section 45 in Suit No. 2202/2000 which
had been filed by the Defendants was dismissed. It has been contended by Mr.
Sawhney that in this Order there is an observation that the suits filed by
Defendant No. 1 do not tantamount to abandonment of the Arbitration Clause. On
3.11.2001 Defendant No. 1 filed Suit No. 2089/2001 for the issuance of mandatory
and permanent injunction and the prayer clause calls to be reproduced:

     a) Defendant Nos. 5 and 6 be directed by issue of a Mandatory Injunction or
otherwise to forthwith exchange the documents under paragraph 'A' and 'B' of the
Joint Instructions as stated in Paragraph 75 of the Plaint without awaiting
further lodgement of the 'No Objections' from Defendant Nos. 7 and 8.

     b)In the alternate and without prejudice to the relief claimed under para
(a) above, this Hon'ble Court may be pleased to order by issue of a Mandatory
Injunction or otherwise the Defendant Nos. 3, 4, 7 and 8 to forthwith lodge with
Defendant Nos. 5 and 6 the 'No Objections' of Defendant Nos. 7 and 8 to the sale
of the Plaintiff's shares to Defendant No. 3 and direct the said Defendant Nos.
5 and 6 to forthwith exchange the documents.

     (c) Restrain Defendant No. 3 (Bharti) by way of an Injunction Order or
otherwise from committing any breach of the May 2001 Agreements and/or from
obstructing, whether directly or indirectly, the completion of the formalities
with Defendant Nos. 5 and 6.

     (d) Restrain Defendant Nos. 1 to 4 from acting upon or in any way, directly
or indirectly, giving effect to the Resolutions circulated to the Directors of
Defendant No. 4 under cover of letter dated 31st August 2001, till such time as
the registration of transfer of shares of the Plaintiff against payment of full
consideration.

     (e) Issue a Mandatory Injunction or otherwise direct the Defendant Nos. 1,
2 and 3 to disclose: (i) the Agreements signed between them from the Sale and
Purchase of the shares of SKYCELL (ii) the 'No Objection' clearances and
approvals obtained by them in connection with the sale/purchase of the shares of
SKYCELL.

     (f) Issue a decree of declaration declaring the Annual General Meeting of
SKYCELL purportedly held on 28th September, 2001 to be illegal and void.

     (g) Issue a permanent Injunction against Defendant Nos. 3 and 4 restraining
them from effecting any changes: (i) in the Board of Directors of SKYCELL
Communications Ltd., (ii) in the Capital of SKYCELL Communications Ltd., and
(iii) In the name of SKYCELL Communications Ltd. and/or from acting in breach of
the Plaintiff's rights under the Joint Venture Agreement dated 12th August,
1992.

   In paragraph 115 of the Plaint it has been stated that leave be granted to
it, in terms of Order II Rule 2 of the Code of Civil Procedure to claim any
other relief, which is now being construed to be tantamount to reserving its
rights to proceed in arbitration. It may also be recalled that Defendant No. 1
had issued a notice for commencing arbitration proceedings on October 9, 2000
but instead of doing so had filed this Suit. It is also relevant to mention that
this very Suit was dismissed in default on 27.9.2004. The question is whether,
assuming the existence of an arbitration clause between the parties, this clause
had been waived.

   22. On 22.8.2003 arbitration proceedings had been initiated by Defendant No.
1 before the ICC. On 26.9.2003 this Court ordered a stay of the arbitration
proceedings which were to be held pursuant to the Defendants' request dated
22.8.2003. Convoluted and complicated sequence of events should normally be left
to the Arbitrators to appreciate, consider and unravel. Unless it is indubitably
clear that the substratum of the Arbitration Agreement has disintegrated, and if
the only conclusion that can be drawn is that the foreign Arbitration is
motivated to harass and thereby coerce the other parties into a settlement,
Courts should not interference in the commencement, conduct and continuance of
proceedings, before the Arbitrators. A greater degree of investigation is
expected of the court in the case of a foreign arbitration.

   23. Having expressed this opinion, so far as the present case is concerned,
it has already been narrated that the Defendants contention predicated on
Section 45 of the Arb. & Con. Act had been specifically rejected. Perhaps it is
for this reason that the Defendant had sagaciously not filed a second
application under Section 45 which would have been immediately barred from
consideration on the grounds of res judicata. The arbitration clause, by any
consideration, has now become inoperative, and I have no hesitation in declining
to refer the parties to arbitration.

   24. If the contention is that this application had not been filed because the
Defendant had been advised that the arbitration is not a foreign but a domestic
one, then Chapter II of Part I would immediately be attracted, with fatal
repercussions for the contesting Defendant. In the fascicules of Chapter II,
Section 8 of the Arb. & Con. Act enjoins the filing of an application before a
judicial Authority not later than when submitting the first statement on the
substance of the dispute. Such an application, which is barred from being
entertained unless it is accompanied by original arbitration agreement or a duly
certified copy thereof, has not been filed by the contesting Defendant, for
reasons which have not been explained at all.

   25. Keeping all these factors in mind I am unable to come to any conclusion
other than confirming the interim order already passed. By way of reiteration
the Defendant had in earlier proceedings posited that there was no arbitration
agreement between itself and the Plaintiff. Assuming that such an agreement
existed the Defendant has taken sundry legal steps in various civil Courts
notwithstanding. The Defendant is not rendered remediless. All that has happened
is that it must pursue the protection of its interests in a Civil Court rather
than an Arbitral Tribunal.

   26. Arbitration proceedings requested for by Defendant No. 1 DSS Enterprises
Pvt. Ltd. vide letter dated 22.8.2003, and the operation of letter dated
28.8.2003 of the ICC, International Court of Arbitration are stayed during the
pendency of the suit.

   27. I.A. 9735/2003 stands allowed of accordingly.

   IAs No. 9923/2003 & 9925/2003

   28. Since the interim Order has been made absolute I am satisfied that it
should be extended to Defendant No. 2, namely Crompton Greaves Ltd. and
Defendant No. 5, namely, Bharti Cellular Limited.

   29. Applications stand disposed of accordingly.