of the parties as to the place of arbitration and where in fact the
arbitration took place.
If in pursuance of the arbitration agreement, the
arbitration took place outside India, there is a clear exclusion of
Part-I of the Arbitration Act. In the present case, the parties
expressly agreed that the arbitration will be conducted according
to the ICC Rules of Arbitration and left the place of arbitration to
be chosen by the ICC. The ICC in fact, chose London as the seat
of arbitration after consulting the parties. The arbitration was
held in London without demur from any of the parties. All the
awards i.e. the two partial final awards, and the third final
award, were made in London and communicated to the parties.
We find that this is a clear case of the exclusion of Part-I vide
Eitzen Bulk A/S (supra), and the decisions referred to and
followed therein.
32. The respondent contends before us that Part-I of the
award was applicable, however they themselves stated the place
of arbitration to be London.
It is pertinent to reproduce the relevant portion in the
respondent’s application before the ICC while objecting to the
authority of the law firms representing the appellant. It stated:-
“The seat of this arbitration is London.”
Therefore, the two reasons for Part-I not being applicable
are as follows:-
(i) Parties agreed that the seat maybe outside India as
may be fixed by the ICC; and
(ii) It was admitted that the seat of arbitration was
London and the award was made there.
Therefore, there is no doubt that Part-I has no application
because the parties chose and agreed to the arbitration being
conducted outside India and the arbitration was in fact held
outside India.
33. In view of the foregoing observations, we find that the
High Court committed an error in observing that the seat of
arbitration itself is not a decisive factor to exclude Part-I of the
Arbitration Act. We therefore set aside the judgment of the High
Court and dismiss the petition filed by the respondent under
Section 34 of the Arbitration Act before the Bombay High Court.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 3885 OF 2017
IMAX CORPORATION
V
M/S E-CITY ENTERTAINMENT (I) Pvt. LTD.
Dated:March 10, 2017
2. The appellant-Imax Corporation has challenged the interim
order dated 10.06.2013 passed by the High Court of Judicature
at Bombay in Notice of Motion No.2560 of 2008 in the Arbitration
Petition (Lodging) No.525 of 2008.
3. By the aforementioned order, the High Court held that the
petition under Section 34 of the Arbitration and Conciliation Act,
1996 (for short, "the Arbitration Act") filed by the
respondent-M/S E-City Entertainment (I) Pvt. Ltd. against two
partial final awards dated 11.02.2006, 24.08.2007, and third
final award dated 27.03.2008 was maintainable.
The appellant had objected to the maintainability of the
petition under Section 34 of the Arbitration Act on the ground
that the arbitration clause excluded the applicability of Part-I
which contains the said section.
4. The only issue before us is whether the petition under
Section 34 of the Arbitration Act is maintainable before a court
in India, and in this case, the Bombay High Court.
5. On 28 . 09 . 2000 , the appellant entered into an
agreement with the respondent for a supply of large format
projection systems for cinema theatres to be installed in theatres
all across India. Clause 14 of the agreement contained an
arbitration clause which reads as follows:
"This Agreement shall be governed by and
construed according to the laws of
Singapore, and the parties attorn to the
jurisdiction of the courts of Singapore. Any
dispute arising out of this master agreement
or concerning the rights, duties or liabilities
of E-City or Imax hereunder shall be finally
settled by arbitration pursuant to the ICC
Rules of Arbitration."
6. On 16 . 06 . 2004 , the appellant filed a request for
arbitration with the ICC, and claimed damages. On 08.10.2004,
the ICC i.e. the chosen arbitral forum fixed London as the place
of arbitration i.e. the juridical seat of arbitration, after consulting
the parties.
FIRST PARTIAL FINAL AWARD
7. On 11.02.2006, the first partial final award was made in
favour of the appellant declaring that the respondent was in
breach of the agreement and therefore liable for damages. The
award stated that the decision on the other issues, including
damages/costs would be reserved for a future award.
8. The aforementioned declaration was made after observing
in the award that the court of the ICC had decided to fix London
as the juridical seat of arbitration in accordance with the powers
vested in the court under Article 14(1) of the ICC Rules. The
observation read as follows:
"As well be noticed, no provision was made
for a venue for any arbitration contemplated
by Clause 14, but subsequently the court of
the ICC decided on the 8th of October, 2004
to fix London as the juridical seat of the
arbitration in accordance with the powers
vested in the court under Article 14 of the
ICC Rules. Accordingly, this is an arbitration
to which Part-I of the English Arbitration Act
1996 applies."
9. The appellant filed its statement of damages before
the Arbitral Tribunal. The respondent filed its statement
of defence.
10. On 05.09.2006 the respondent objected that the appellant
has no legal status and the law firm representing them is not
authorized to pursue the arbitration. In that application, the
respondent stated as follows:
"The seat of this arbitration is London.
Therefore, English law determines the effect
of any want of capacity suffered by "Imax
Ltd" under the Canadian law as
a result of its amalgamation into Imax
Corporation with effect from 1st January,
2001."
SECOND PARTIAL FINAL AWARD
11. On 24.08.2007, the Arbitral Tribunal passed the second
partial award rejecting the above objection filed by the
respondent. By this award, the tribunal determined the
quantum of damages payable to the appellant. This award was
also made in London, the juridical seat of this arbitration. A sum
of $9,406,148.31 was awarded to the appellant.
THIRD FINAL AWARD
12. The Arbitral Tribunal passed a final award on 27.03.2008
on the issue of interest and costs. A sum of $1,118,558.54 by
way of interest and a further sum of $2,512.60 per day from
01.10.2007 until the payment of the award was awarded in
favour of the appellant. Sums of $400,000 and $384,789.21 by
way of costs of arbitration fixed by the ICC and costs by way of
attorney’s fees, expert fees and related expenses were also
directed to be paid. Final award dated 27.03.2008 was received
by the respondent on 01.04.2008.
The final award on the issues of interest and costs was
amalgamated with the earlier awards, both of which were
incorporated by reference into itself. The third final award also
stated that the place of arbitration is London.
PETITION UNDER SECTION 34 BEFORE THE BOMBAY
HIGH COURT
13. On 21.07.2008, the respondent challenged the aforesaid
awards under Section 34 of the Arbitration Act before the
Bombay High Court in India after a period of more than two
years from the first partial award, more than one year from the
second partial award and a period of 3 months, 24 days from the
final award.
14. The learned Single Judge allowed the notice of motion
on the condonation of delay and held that the petition under
Section 34 was maintainable before the Bombay High Court.
Hence, this appeal.
15. The only question that arises for consideration before us is
whether the challenge to the award made by the respondent
under Section 34 of the Arbitration Act is maintainable before a
court in India. Clearly, if the answer is in the negative it is not
necessary to decide the question of delay. Thus, we make it clear
that we are not deciding where else in the world a challenge to
the award would be maintainable.
16. Dr. A.M. Singhvi, learned senior counsel for the respondent
relied on Clause VIII (2) of the Request for Arbitration dated
16.06.2004 wherein the petitioner stated as follows:
"VIII Place of Arbitration, Law and Language
(2) Section 14 of the letter Agreement is
silent as to the place of the arbitration.
Claimant believes that Paris and France are
suitable places for arbitration to take place,
indeed, this is the venue chosen by the ICC
for the related EML Arbitration and the
claimant believes that this arbitration should
be consolidated along with the pending EML
Arbitration. Paris is roughly equal distant
from both parties."
17. The above submission was made in response to Mr. Pallav
Shisodia’s argument, learned senior counsel for the appellant,
that the respondent had in fact stated in its petition under
Section 34 of the Arbitration Act that "the seat of arbitration was
in London". Also in the counter affidavit before this Court it was
submitted that the seat of arbitration being London in no way
precludes the respondent from challenging the awards under
Section 34 of the Act.
Having noted the above submissions and statements made
by the parties, we propose to decide the question on the
construction of Clause 14 and the law governing such challenges.
CLAUSE 14: THE ARBITRATION CLAUSE
18. Clause 14 of the Agreement deals with two matters:
(i) the laws which will govern the agreement; and
(ii) a provision of settling disputes by arbitration.
As regards the first, it provides that in case a question
arises as to the agreement i.e. what the agreement means or
what the parties intended, it shall be interpreted according to the
laws of Singapore and these laws will govern the understanding
and the acts of the parties. Further, in case the parties resort to
a court, they shall approach the courts of Singapore which alone
shall adjudicate upon the issue. The courts of Singapore will
thus adjudicate in relation to any non-arbitrable dispute that
might arise under the agreement or possibly a dispute regarding
the correctness or validity of an arbitration award. It is not
necessary to consider whether a challenge to the award would lie
in Singapore in this case because the award in fact was made in
London and in any case no party has approached the court in
Singapore.
Secondly, this clause provides that any dispute arising out
of this agreement or concerning the rights, duties or liabilities of
the parties shall be settled by arbitration. The arbitration shall
be pursuant to the ICC Rules of Arbitration. In other words, the
parties shall invoke the ICC Rules of Arbitration in case a dispute
arises between them concerning their rights, duties or liabilities.
The intention is to have the dispute settled by and in accordance
with the ICC Rules of Arbitration. In this sense, the ICC Rules of
Arbitration must be construed as being read into this clause.
THE ICC RULES
19. The ICC Rules provide for the entire conduct of arbitration
from its commencement to the passing of an award. They
provide that the arbitration shall be conducted by the court i.e.
the International Court of Arbitration, appointed by the council of
the ICC. A party wishing to have recourse to arbitration under
the rules is required to submit a Request for Arbitration to the
Secretariat of the ICC along with the information prescribed and
in particular comments as to the place of arbitration. The ICC
Rules clearly stipulate that the seat of arbitration shall be fixed
by the court, in the following words:-
“1. The place of the arbitration shall be
fixed by the Court unless agreed
upon by the parties.
2. The Arbitral Tribunal may, after
consultation with the parties,
conduct hearings and meetings at
any location it considers appropriate
unless otherwise agreed by the
parties.
3. The Arbitral Tribunal may
deliberate at any location it
considers appropriate.”
In this case, the appellant had proposed the venue of
arbitration to be Paris in France. Upon notice being issued, the
respondent was obliged to file an answer including a comment
concerning the number of arbitrators and their choice as to the
place of arbitration.
The respondent, in their answer stated that the venue
suggested by the claimant i.e. Paris in France would
unnecessarily increase the cost of arbitration and therefore
suggested that Singapore would be the most appropriate and
convenient venue for the arbitration, vide “Answer to Request
for Arbitration pursuant to Article 5(1) of the ICC Rules of
Arbitration” dated 30.08.2004.
The International Court of Arbitration decided inter alia
that London, United Kingdom will be the juridical seat of the
arbitration in view of Article 14(1) of the ICC Rules and,
therefore, proceeded on the basis of the Part-I of the English
Arbitration Act, 1996.
What is significant and needs to be pointed out is that the
parties had agreed in pursuance of the agreement to have the
dispute decided in accordance with the ICC Rules by submitting
the dispute to the ICC. The court (of the ICC) considered the
stand of the parties on the venue for arbitration and fixed
London as the seat of arbitration.
INTENTION OF THE PARTIES TO EXCLUDE PART-I
20. In this case, there is an express choice of the law
governing the contract as a whole i.e. Singaporean Law.
There is an express agreement that any arbitration would
be governed by the ICC Rules of Arbitration. The general
principle is that, in the absence of any contradictory indication, it
shall be presumed that the parties have intended that the proper
law of contract as well as the law governing the arbitration
agreement is the same as the law of the country in which the
arbitration is agreed to be held.
21. It would be apposite to refer to a case decided by the
Supreme Court of Sweden from a passage in Redfern and
Hunter1
. Quoting the Supreme Court of Sweden it is stated that:-
“…no particular provision concerning the
applicable law for the arbitration agreement
itself was indicated [by the parties]. In such
circumstances the issue of the validity of the
arbitration clause should be determined in
accordance with the law of the state which
the arbitration proceedings have taken
place, that is to say, Swedish Law.”
In the present case, the arbitration clause contemplates an
award made in pursuance to the ICC rules without specifying the
applicable law for the arbitration agreement. It would therefore
be appropriate to hold that the question of validity of the award
should be determined in accordance with the law of the state in
which the arbitration proceedings have taken place i.e. the
English Law. Though for the purposes of this decision we would
only hold that the conduct of the parties exclude the applicability
of Part-I.
In other words, where the parties have not expressly
chosen the law governing the contract as a whole or the
1
Redfern and Hunter on International Arbitration, Fifth Edition
arbitration agreement in particular, the law of the country where
the arbitration is agreed to be held has primacy.
22. Here, an express choice has been made by the parties
regarding the conduct of arbitration, i.e., that a dispute shall be
finally settled by arbitration according to the ICC Rules of
Arbitration. The parties have not chosen the place of arbitration.
They have simply chosen the rules that will govern the
arbitration, presumably aware of the provision in the rules that
the place of arbitration will be decided by the ICC vide Article
14(1) of the ICC Rules. The ICC having chosen London,
leaves no doubt that the place of arbitration will attract the law
of UK in all matters concerning arbitration.
23. The arbitration clause appears consistent with Section 2(7)
of the Arbitration Act, 1996 which recognizes the freedom to
authorize any person including an institution to determine an
issue such as the choice of the place of arbitration.
24. Dr. Singhvi rightly submitted that the decisions of the court
in Sakuma Exports Ltd. vs. Louis Dreyfus Commodities Suisse
Sa2
, Harmony Innovation Shipping Ltd. vs. Gupta Coal India
2
(2015) 5 SCC 656
Ltd.3
, and Reliance Industries Ltd. vs. Union of India4 do not help
the appellant in view of the main difference between the
abovementioned cases and the present one i.e. in all these
cases, the parties had specifically agreed that the seat of
arbitration will be London. The arbitration clause in these cases
itself specified the seat to be at London. In Reliance Industries
Ltd. (supra), the agreement that the seat of arbitration would be
London was incorporated in the final partial award.
However, as we shall see the agreement to have the
arbitration conducted by the ICC and the choice of London as the
seat of arbitration has made no material difference for the
purpose of exclusion of Part-I.
The relevant clause in these cases was undoubtedly
different in that the seat of arbitration outside India was
specified in the clause itself. However, we have found that the
relevant clause in the present case had the effect of an
agreement to have the seat of the arbitration outside India, as
chosen by the ICC and agreed to by the parties.
25. We find that in the present case, the seat of arbitration has
not been specified at all in the arbitration clause. There is
3
(2015) 9 SCC 172
4
(2014) 7 SCC 603
however an agreement to have the arbitration conducted
according to the ICC rules and thus a willingness that the seat of
arbitration may be outside India. In any case, the parties having
agreed to have the seat decided by the ICC and the ICC having
chosen London after consulting the parties and the parties
having abided by the decision, it must be held that upon the
decision of the ICC to hold the arbitration in London, the parties
agreed that the seat shall be in London for all practical purposes.
Therefore, there is an agreement that the arbitration shall be
held in London and thus Part-I of the Act should be excluded.
26. The construction that the parties agreed to exclude the
applicability of Part-I of the Act and generally to have the entire
agreement governed not according to Indian law is also apparent
from the express provision that:
“This agreement shall be governed by and
construed according to laws of Singapore
and parties attorn to jurisdiction of the
Courts of Singapore”.
In para 25 of National Thermal Power Corporation vs.
Singer Company5
, this Court held:
“On the other hand, where the proper law of
the contract is expressly chosen by the
parties, as in the present case, such law
must, in the absence of an unmistakable
5
(1992) 3 SCC 551
intention to the contrary, govern the
arbitration agreement which, though
collateral or ancillary to the main contract, is
nevertheless a part of such contract”.
This principle is again reiterated in Sakuma Exports
Ltd. (supra).
This stipulation expressly excludes Part-I of the Act
because it governs both the principal agreement as well as the
accompanying arbitration agreement.
NON- APPLICABILITY OF PART-I
27. It is settled law in India that the provisions of Part-I of the
Arbitration Act would apply to all arbitrations and all proceedings
relating thereto. In Bhatia International vs. Bulk Trading S.A.
and Anr.6
, this Court observed:-
“32. …….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.”
6
(2002) 4 SCC 105
This view has been followed in several cases, See Venture
Global Engg. vs. Satyam Computer Services Ltd.7
, Videocon
Industries Limited vs. Union of India8
, Dozco India (P) Ltd. vs.
Doosan Infracore Co. Ltd.9
, Cauvery Coffee Traders vs. Horner
Resources (International) Co. Ltd.10
, Reliance Industries Ltd.
(supra) and Sakuma Exports Ltd. (supra), Union of India vs.
Reliance Industries Ltd.11
, Harmony Innovation Shipping Ltd.
(supra) and Eitzen Bulk A/S vs. Ashapura Minechem Ltd.12
The relevant clause in these cases was undoubtedly
different in that, the seat of arbitration outside India was
specified in the clause itself. However, we have found that the
clause in this case had the effect of an agreement to have the
seat of arbitration outside India, as chosen by the ICC, and as
agreed to by the parties.
28. On a true construction of Clause 14 in this case, there is
no doubt the parties have agreed to exclude Part-I by agreeing
that the arbitration would be conducted in accordance with the
ICC Rules. The parties were undoubtedly conscious that the ICC
could choose a venue for arbitration outside India. That in our
7
(2008) 4 SCC 190
8
(2011) 6 SCC 161
9
(2011) 6 SCC 179
10 (2011) 10 SCC 420
11 (2015) 10 SCC 213
12 (2016) 11 SCC 508
view is sufficient to infer that the parties agreed to exclude
Part-I. The ICC could well have chosen a venue in India. The
possibility that ICC could have chosen India is not a counter
indication of this inference. It could also be said that the
decision to exclude the applicability of Part-I was taken when the
ICC chose London after consulting the parties. Either way Part-I
was excluded.
29. The view that it is the law of the country where arbitration
is held that will govern the arbitration and matters related
thereto such as a challenge to the award is well entrenched. In
Dozco India (P) Ltd. (supra), this Court observed:-
“In the absence of express agreement,
there is a strong prima facie presumption
that the parties intend the curial law to be
the law of the ‘seat’ of the arbitration i.e. the
place at which the arbitration is to be
conducted, on the ground that that is the
country most closely connected with the
proceedings. So in order to determine the
curial law in the absence of an express
choice by the parties it is first necessary to
determine the seat of the arbitration, by
construing the agreement to arbitrate.”
30. The relationship between the seat of arbitration and the
law governing arbitration is an integral one. The seat of
arbitration is defined as the juridical seat of arbitration
designated by the parties, or by the arbitral institution or by the
arbitrators themselves as the case may be. It is pertinent to
refer to the following passage from Redfern and Hunter (supra):-
“This introduction tries to make clear, the
place or seat of the arbitration is not merely
a matter of geography. It is the territorial
link between the arbitration itself and the
law of the place in which that arbitration is
legally situated:
When one says that London, Paris
or Geneva is the place of
arbitration, one does not refer
solely to a geographical location.
One means that the arbitration is
conducted within the framework of
the law of arbitration of England,
France or Switzerland or, to use an
English expression, under the
curial law of the relevant country.
The geographical place of
arbitration is the factual connecting
factor between that arbitration law
and the arbitration proper,
considered as a nexus of
contractual and procedural rights
and obligations between the
parties and the arbitrators.
The seat of arbitration is thus intended to be
its centre of gravity.”
Further, in the same work on International Arbitration by
Redfern and Hunter (supra), the following passage emphasizes
the connection between the lex arbitri and lex fori:-
“Parties may well choose a particular place
of arbitration precisely because its lex arbitri
is one which they find attractive.
Nevertheless, once a place of arbitration has
been chosen, it brings with it its own law. If
that law contains provisions that are
mandatory so far as arbitration are
concerned, those provisions must be
obeyed. It is not a matter of choice any
more than the notional motorist is free to
choose which local traffic laws to obey and
which to disregard.”
Thus, it is clear that the place of arbitration determines the
law that will apply to the arbitration and related matters like
challenges to the award etc, see Eitzen Bulk A/S (supra).
31. The significant determinant in each case is the agreement
of the parties as to the place of arbitration and where in fact the
arbitration took place.
If in pursuance of the arbitration agreement, the
arbitration took place outside India, there is a clear exclusion of
Part-I of the Arbitration Act. In the present case, the parties
expressly agreed that the arbitration will be conducted according
to the ICC Rules of Arbitration and left the place of arbitration to
be chosen by the ICC. The ICC in fact, chose London as the seat
of arbitration after consulting the parties. The arbitration was
held in London without demur from any of the parties. All the
awards i.e. the two partial final awards, and the third final
award, were made in London and communicated to the parties.
We find that this is a clear case of the exclusion of Part-I vide
Eitzen Bulk A/S (supra), and the decisions referred to and
followed therein.
32. The respondent contends before us that Part-I of the
award was applicable, however they themselves stated the place
of arbitration to be London.
It is pertinent to reproduce the relevant portion in the
respondent’s application before the ICC while objecting to the
authority of the law firms representing the appellant. It stated:-
“The seat of this arbitration is London.”
Therefore, the two reasons for Part-I not being applicable
are as follows:-
(i) Parties agreed that the seat maybe outside India as
may be fixed by the ICC; and
(ii) It was admitted that the seat of arbitration was
London and the award was made there.
Therefore, there is no doubt that Part-I has no application
because the parties chose and agreed to the arbitration being
conducted outside India and the arbitration was in fact held
outside India.
33. In view of the foregoing observations, we find that the
High Court committed an error in observing that the seat of
arbitration itself is not a decisive factor to exclude Part-I of the
Arbitration Act. We therefore set aside the judgment of the High
Court and dismiss the petition filed by the respondent under
Section 34 of the Arbitration Act before the Bombay High Court.
34. In the result the appeal is allowed as no order to costs.
…...................................………J.
[S.A. BOBDE]
..………………………….…..........…..J.
[ASHOK BHUSHAN]
NEW DELHI,
March 10, 2017
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