Bgs Sgs Soma Jv vs Nhpc Ltd.

Interpretation of judgments – Principles – Held: Judgments of courts are not to be construed as statutes – They are not to be read as Euclid’s theorems – Observations made therein must be read in the context in which they appear.

Judgment having conflicting portions – Held: A judgment must be read as a whole, so that conflicting parts may be harmonised to reveal the true ratio of the judgment – If harmonising is not possible, first it should be seen if ratio decidendi can be called out without the conflicting portion – If not the binding nature of the precedent on the point on which there is a conflict in judgment, comes under a cloud.

Allowing the appeals, the Court

HELD: 1.1 Given the fact that there is no independent right of appeal under Section 13(1) of the Commercial Courts Act, 2015, which merely provides the forum of filing appeals, it is the parameters of Section 37 of the Arbitration Act,1996 alone which have to be looked at in order to determine whether the present appeals were maintainable. [Para 14] [764-C]

1.2 Section 37(1) Arbitration Act makes it clear that appeals shall only lie from the orders set out in sub-clauses (a),

(b) and (c) and from no others. The pigeonhole that the High Court in the impugned judgement has chosen to say that the appeals in the present cases were maintainable is sub-clause (c). According to the High Court, even where a Section 34 application is ordered to be returned to the appropriate Court, such order would amount to an order “refusing to set aside an arbitral award under Section 34”. [Para 14] [764-C-D]

1.3 Under the proviso to Section 13(1A) of the Commercial Courts Act, 2015, Order XLIII of the CPC is also mentioned. This provision is conspicuous by its absence in Section 37 of the Arbitration Act, 1996, which alone can be looked at for the purpose of filing appeals against orders setting aside, or refusing to set aside awards under Section 34. Also, what is missed by the impugned judgment is the words “under Section 34”. Thus, the refusal to set aside an arbitral award must be under Section 34, i.e., after the grounds set out in Section 34 have been applied to the arbitral award in question, and after the Court has turned down such grounds. Admittedly, on the facts of the present cases, there was no adjudication under Section 34 of the Arbitration Act, 1996 - all that was done was that the Special Commercial Court at Gurugram allowed an application filed under Section 151 read with Order VII Rule 10 CPC, determining that the Special Commercial Court at Gurugram had no jurisdiction to proceed further with the Section 34 application, and therefore, such application would have to be returned to the competent court situate at New Delhi. Thus, the appeals filed in the present case do not fall within Section 37 of the Arbitration Act,1996 and are not maintainable. [Paras 15-16 and 22] [764-E-G-H; 765-A-B; 770-B]

Kandla Export Corporation & Anr. v. M/s OCI

Corporation & Anr. (2018) 14 SCC 715 : [2018] 1 SCR 915 – relied on.

Hamanprit Singh Sidhu v. Arcadia Shares & Stock Brokers Pvt. Ltd 2016 234 DLT 30 (DB) ; South Delhi MunicipalCorporation v. Tech Mahindra EFA (OS) (Comm.) 3 of 2019 – approved.

Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd. 2018 SCC Online Del 9338 – held per-incuriam.

Municipal Corporation of Delhi & Ors. v.

International Security & Intelligence Agency Ltd. (2004) 3 SCC 250 : [2003] 1 SCR 951 ; Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner and Ors. (2013) 16 SCC 1 : [2013] 11 SCR 371 ; South Delhi Municipal Corporation v. Tech Mahindra EFA (OS) (Comm.) 3 of 2019 – referred to.

2.1 In the statutory setting under Arbitration Act of 1940, the “place” in which the award is made, is not referred to at all. Given this fact, the “Court” was defined as any Civil Court having jurisdiction to decide questions forming the subject matter of the reference to arbitration if the same had been the subject matter of a suit. The UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985) was then adopted by this country. The UNCITRAL Model Law introduced the concept of “place” or “seat” of the arbitral proceedings. [Paras 28 and 29] [772-F-G]

2.2 The Arbitration Act, 1996 repealed the Arbitration Act, 1940. As is stated in its preamble, the Arbitration Act, 1996 adopted provisions of the UNCITRAL Model Law, as they had made a significant contribution to the establishment of a unified legal frame work for the fair and efficient settlement of disputes arising in international commercial relations. The Arbitration Act, 1996 refers to “the place” of arbitration and defines ‘Court’, and indicates which Courts have jurisdiction in relation to arbitral proceedings in several sections in Part I. [Paras 30 and 31] [774A-B]

2.3 The new provisions contained in Sections 20 and 31(4) of the Arbitration Act, 1996 are a replication of Articles 20 and 31(3) of the UNCITRAL Model Law, in which pride of place is given to the juridical seat of the arbitral proceedings. However, the definition of “court” in Section 2(1)(e) of the Arbitration Act, 1996 continues the definition contained in the Arbitration Act, 1940, but replaces any and every civil court by only the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary civil jurisdiction. Section

42 of the Arbitration Act, 1996 also substantially follows the drill of Section 31(4) of the Arbitration Act, 1940. [Para 33] [775-H; 776-A-B]

2.4 Thus, given the new concept of “juridical seat” of the arbitral proceedings, and the importance given by the Arbitration Act, 1996 to this “seat”, the arbitral award is now not only to state its date, but also the place of arbitration as determined in accordance with Section 20. However, the definition of “Court” contained in Section 2(1)(c) of the Arbitration Act, 1940, continued as such in the Arbitration Act, 1996, though narrowed to mean only principal civil court and the High Court in exercise of their original ordinary civil jurisdiction. Thus, the concept of juridical seat of the arbitral proceedings and its relationship to the jurisdiction of courts which are then to look into matters relating to the arbitral proceedings including challenges to arbitral awards was unclear, and had to be developed in accordance with international practice on a case by case basis by this Court. [Para 34] [776-C-D]

2.5 The judgment in *BALCO case would show that where parties have selected the seat of arbitration in their agreement, such selection would then amount to an exclusive jurisdiction clause, as the parties have now indicated that the Courts at the “seat” would alone have jurisdiction to entertain challenges against the arbitral award which have been made at the seat. The *BALCO judgment when read as a whole, applies the concept of “seat” which is in Section 20 of the Arbitration Act, 1996, by harmoniously construing Section 20 with Section 2(1)(e), so as to broaden the definition of “court”, and bring within its ken courts of the “seat” of the arbitration. However, this proposition is contradicted when paragraph 96 of the judgment speaks of the concurrent jurisdiction of Courts within whose jurisdiction the cause of action arises wholly or in part, and Courts within the jurisdiction of which the dispute resolution i.e. arbitration, is located. [Paras 40 and 41] [783-H; 784-A-D]

2.6 Judgments of Courts are not to be construed as statutes, neither are they to be read as Euclid’s theorems. All observations made must be read in the context in which they appear. In any case, a judgment must be read as a whole, so that conflicting parts may be harmonised to reveal the true ratio of the judgment. However, if this is not possible, and it is found that the internal conflicts within the judgment cannot be resolved, then the first endeavour that must be made is to see whether a ratio decidendi can be culled out without the conflicting portion. If not, then, the binding nature of the precedent on the point on which there is a conflict in a judgment, comes under a cloud. [Paras 43 and 45] [785-C; 787-A-B]

2.7 If paragraphs 75, 76, 96, 110, 116, 123 and 194 of the judgment in *BALCO case are read together, what becomes clear is that Section 2(1)(e) has to be construed keeping in view Section 20 of the ArbitrationAct, 1996, which gives recognition to party autonomy - the Arbitration Act, 1996 having accepted the territoriality principle in Section 2(2), following the UNCITRAL Model Law. The narrow construction of Section 2(1)(e) was expressly rejected in *BALCO case. This being so, what has then to be seen is what is the effect Section 20 on Section 2(1)(e) of the Arbitration Act, 1996. [Para 46] [788-AB]

2.8 In **Indus Mobile Distribution Private Limited case the provisions of Section 20 were properly analysed in the light of the 246 thReport of the Law Commission of India titled, ‘Amendments to the Arbitration and Conciliation Act, 1996’ (i.e. the “Law Commission Report, 2014”), under which Section 20(1) and (2) would refer to the “seat” of the arbitration, and Section 20(3) would refer only to the “venue” of the arbitration. Given the fact that when parties, either by agreement or, in default of there being an agreement, where the arbitral tribunal determines a particular place as the seat of the arbitration under Section 31(4) of the Arbitration Act, 1996, it becomes clear that the par- ties having chosen the seat, or the arbitral tribunal having determined the seat, have also chosen the Courts at the seat for the purpose of interim orders and challenges to the award. [Para 47] [788-C-E]

2.9 The Law Commission Report, 2014 also recommended an amendment in the definition of “Court” under Section 2(1)(e) of the Arbitration Act, 1996, so that in the case of international commercial arbitrations held in India, the High Court alone should be the “Court” for the purposes of the Arbitration Act, 1996, even where such a High Court does not exercise ordinary original jurisdiction. There commendation made by the Law Commission, 1996. [Para 49] [790-F-G]

2.10 The said amendment carried out in the definition of “Court” is also a step showing the right direction, namely, that in international commercial arbitrations held in India, the High Court alone is to exercise jurisdiction over such proceedings, even where no part of the cause of action may have arisen within the jurisdiction of such High Court, such High Court not having ordinary original jurisdiction. In such cases, the “place” where the award is delivered alone is looked at, and the High Court given jurisdiction to supervise the arbitration proceedings, on the footing of its jurisdiction to hear appeals from decrees of courts subordinate to it, which is only on the basis of territorial jurisdiction which in turn relates to the “place” where the award is made. In the light of this im- portant change in the law, Section 2(1)(e)(i) of the Arbitration Act, 1996 must also be construed in the manner indicated by this judgment. [Para 50] [791-H; 792A-B]

2.11 If, the conflicting portion of the judgment of *BALCO case in paragraph 96 is kept aside for a moment, the very fact that parties have chosen a place to be the seat would necessarily carry with it the decision of both parties that the Courts at the seat would exclusively have jurisdiction over the entire arbitral process. In fact, subsequent Division Benches of this Court have understood the law to be that once the seat of arbitration is chosen, it amounts to an exclusive jurisdiction clause, insofar as the Courts at that seat are concerned. [Paras 51 and 52] [792F-H]

2.12 The moment a seat is designated by agreement between the parties, it is akin toan exclusive jurisdiction clause, which would then vest the Courts at the “seat” with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. [Para 55] [796D]

2.13 It will thus be seen that wherever there is an express designation of a “venue”, and no designation of any alternative place as the “seat”, combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the in-exorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding. [Para 63] [802-B]

2.14 Whenever there is the designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings,the expression“arbitration proceedings would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as “tribunals are to meet or have witnesses, experts or the parties” where only hearings are to take place in the “venue”, which may lead to the conclusion, other things being equal, that the venue so stated is not the “seat” of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings “shall be held” at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying there by, that that place is these at of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a “venue” and not the “seat” of the arbitral proceedings, would then conclusively show that such a clause designates a “seat” of the arbitral proceedings. In an International context, if a supranational body of rules is to govern the arbitration, this would further be an indicia that “the venue”, so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the “stated venue”, which then becomes the “seat” for the purposes of arbitration. [Para 84] [816-G-H; 817-A-D]

2.15 In the present case, as per the arbitration agreement, in case a dispute was to arise with a foreign contractor, clause 67.3(ii) would apply. Under this sub-clause, a dispute which would amount to an ‘international commercial arbitration’ within the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in accordance with the Arbitration Act, 1996 read with the UNCITRAL Arbitration Rules, and in case of any conflict, the Arbitration Act, 1996 is to prevail (as an award made under Part I is considered a domestic award under Section 2(7) of the Arbitration Act, 1996 not withstanding the fact that it is an award made in an international commercial arbitration). Applying the Shashoua principle, it is clear that if the dispute was with a foreign contractor under Clause 67.3 of the agreement, the fact that arbitration proceedings shall be held at New Delhi/Faridabad, India in sub-clause (vi) of Clause 67.3, would amount to the designation of either of these places as the “seat” of arbitration, as a supranational body of law is to be applied, namely, the UNCITRAL Arbitration Rules, in conjunction with the Arbitration Act, 1996. As such arbitration would be an international commercial arbitration which would be decided in India, the Arbitration Act, 1996 is to apply as well. There being no other contra indication in such a situation, either New Delhi or Faridabad, India is the designated “seat” under the agreement, and it is there- after for the parties to choose as to in which of the two places the arbitration is finally to be held. [Para 98] [825-E-H; 826-A-B]

2.16 Given the fact that if there were a dispute between NHPC Ltd. and a foreign con- tractor, clause 67.3(vi) would have to be read as a clause designating the “seat” of arbitration, the same must follow even when sub-clause (vi) is to be read with sub-clause (i) of Clause 67.3, where the dispute between NHPC Ltd. would be with an Indian Contractor. The arbitration clause in the present case states that “Arbitration Proceedings shall be held at New Delhi/Faridabad, India…”, thereby signifying that all the hearings, in- cluding the making of the award, are to take place at one of the stated places. Negatively speaking, the clause does not state that the venue is so that some, or all, of the hearings take place at the venue; neither does it use language such as “the Tribunal may meet”, or “may hear witnesses, experts or parties”. The expression “shall be held” also indicates that the so called “venue” is really the “seat” of the arbitral proceedings. The dispute is to be settled in accordance with the Arbitration Act, 1996 which, therefore, applies a national body of rules to the arbitration that is to be held either at New Delhi orFaridabad, given the fact that the present arbitration would be Indian and not international. It is clear, therefore, that even in such a scenario, New Delhi/Faridabad, India has been designated as the “seat” of the arbitration proceedings. [Para 99] [826-B-E]

2.17 However, the fact that in all the three appeals before this Court, the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the “seat” of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the Courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the “seat” are concerned. [Para 100] [826-F-H]

2.18 Consequently, the impugned judgment is set aside, and the Section 34 petition is ordered to be presented in the Courts in New Delhi, as was held by the Single Judge of the Special Commercial Court at Gurugram. [Para 101] [827-A] *Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc.,(2012) 9 SCC 552 : [2012] 12 SCR 327 Amar Nath Om Prakash v. State of Punjab (1985) 1 SCC 345 ; Union of India v. Amrit Lal Manchanda (2004) 3 SCC 75 : [2004] 2 SCR 422 ; Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. 2019 SCC Online SC 929 ; Enercon (India) Ltd. and Ors. v. Enercon GmbH and Anr. (2014) 5 SCC 1 ; **Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Ors., (2017)

7 SCC 678 : [2017] 4 SCR 744 – relied on.

Union of India v. Hardy Exploration and Production (India) Inc. 2018 SCC Online SC 1640 – held not good law.

Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd. (2018) SCC Online Del 9338 – not approved.

Venture Global Engineering v. Satyam Computer Services Ltd. & Anr. (2008) 4 SCC 190 – stood overruled.

Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd. (2011) 16 SCC 179 ; Videocon Indusries Ltd. v. Union of India (2011) 6 SCC 161 ; Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. and Anr. (2015)

9 SCC 172 ; Roger Shashoua & Ors. v. Mukesh

Sharma & Ors., (2017) 14 SCC 722 ; Sumitomo Heavy Industries Ltd. v. ONGC Ltd. & Ors. (1998) 1 SCC

305 ; Hakam Singh v. M/s. Gammon (India) Ltd., (1971) 1 SCC 286 : [1971] 3 SCR 314 ; Reliance Industries Ltd. v. Union of India (2014) 7 SCC 603 : [2014] 6 SCR 456 – referred to.

Roger Shashoua & Ors. v. Mukesh Sharma [2009] EWHC 957 (Comm) ; Harper and Ors. v. National Coal Board (1974) 2 All ER 441 ; Enercon GmbH v. Enercon (India) Ltd. [2012] EWHC 689 ; Shagang South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo Logistics [2015] EWHC 194 ; Process and Indusrial Developments Ltd. v. Nigeria [2019] EWHC 2241 ; Naviera Amazonica Peruana S.A. v. Compania

Internacional De Seguros Del Peru (1988) 1 Lloyd’s Rep 116 (CA) ; Braes of Doune Wind Farm (Scotland) v. Alfred McAlpine Business Services Ltd. [2008] EWHC 436 (TCC) ; C v. D [2007] EWCA Civ. 182 – referred to.