RESOLUTION OF DISPUTES

INTRODUCTION
IF ADEQUATE CARE HAS BEEN
TAKEN TO DRAFT CLAUSES IN A
CONTRACT PRECISELY AND
WITHOUT AMBIGUITIES THE NEED
FOR INTERPRETATION OF A CLAUSE
SHOULD NOT NORMALLY ARISE.
HOWEVER DISPUTES MAY ARISE IN
ASSESSING THE EFFECTS OF EVENTS
SUCH AS SCOPE, DELAYS IN
DELIVERY ETC.
RESOLUTION OF DISPUTES
RESORT TO LEGAL PROCEEDINGS
RESORT TO ADMINISTRATIVE
TRIBUNALS FOR SERVICE MATTERS
ARBITRATION DOMESTIC
SUBMISSION FOR EXPERT VIEW
◦ IN GOVERNMENT
◦ IN PRIVATE SECTOR
• INTERNATIONAL COMMERCIAL
ARBITRATION
RESORT TO LEGAL PROCEEDINGS
 NORMAL REMEDY FOR DISPUTES ARISING
BETWEEN TWO PARTIES (INDIVIDUAL OR
ORGANISATIONS OR COMPANIES)
 FILING OF CIVIL SUITS IN COURTS OF LAW
 APPEALS - TO HIGH COURT SINGLE JUDGE,
DIVISION BENCH AND SUPREME COURT
 PLAINT TO BE ON JUDICIAL STAMP PAPER
OF STIPULATED VALUE BASED ON THE
VALUE OF THE SUIT
 CIVIL CASES TAKE VERY LONG TO BE
DECIDED BY COURTS
 SERVICE MATTERS OF
GOVERNMENT SERVANTS
 TO AVOID DELAYS IN DECISIONS IF THE NORMAL
ROUTE OF COURTS IS FOLLOWED.
 ADMINISTRATIVE TRIBUNALS SET UP TO
EXCLUSIVELY HEAR SUCH CASES IN MANY PLACES
IN THE COUNTRY, WITH A JUDICIAL MEMBER
(USUALLY A RETIRED HIGH COURT JUDGE) AND AN
ADMINISTRATIVE MEMBER (USUALLY RETIRED
FROM CIVIL SERVICES), IN EACH TRIBUNAL..
 INITIALLY, APPEALS AGAINST DECISIONS BY THESE
TRIBUNALS WERE ONLY TO THE SUPREME COURT.
FROM 1997 THEY ARE APPEALABLE TO DIVISION
BENCHES OF HIGH COURTS AND SUPREME COURT.
ARBITRATION DOMESTIC
ARBITRATION

SUBMISSION FOR DETERMINATION OF

DISPUTED MATTER TO A PRIVATE
UNOFFICIAL PERSON(S) SELECTED IN
THE MANNER PROVIDED BY LAW OR
AGREEMENT.

SUBSTITUTION OF THE ARBITRATORS

AWARD OR DECISION, FOR JUDGEMENT
OF A COURT.
 AN "ARBITRATION AGREEMENT" MAY BE IN
THE FORM OF AN ARBITRATION CLAUSE IN
A CONTRACT OR IN THE FORM OF A
SEPARATE AGREEMENT. AN ARBITRATION
AGREEMENT SHALL BE IN WRITING.

NUMBER OF ARBITRATORS
PARTIES FREE TO DETERMINE THE NUMBER
PROVIDED IT IS NOT AN EVEN NUMBER.
IF PARTIES DO NOT DETERMINE THE
NUMBER, THE ARBITRAL TRIBUNAL SHALL
CONSIST OF A SOLE ARBITRATOR.
PLACE OF ARBITRATION

 PARTIESARE FREE TO AGREE ON THE PLACE OF

ARBITRATION.

 IF PARTIES CANNOT AGREE, THE ARBITRAL

TRIBUNAL SHALL DETERMINE THE VENUE
TAKING INTO ACCOUNT THE CIRCUMSTANCES
OF THE CASE AND THE CONVENIENCE OF THE
PARTIES.

DECISION MAKING

 DECISION OF THE ARBITRAL TRIBUNAL

SHALL BE MADE BY A MAJORITY OF ALL ITS
MEMBERS.
SETTING ASIDE AN ARBITRAL AWARD

a) PARTY MAKING THE APPLICATION FURNISHES PROOF

THAT

- A PARTY WAS UNDER SOME INCAPACITY

- ARBITRATION AGREEMENT NOT VALID UNDER THE LAW

TO WHICH THE PARTIES HAVE SUBJECTED IT

- 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

- 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
 OR
b) COURT FINDS THAT

-THE SUBJECT MATTER OF THE DISPUTE IS NOT

CAPABLE OF SETTLEMENT BY ARBITRATION
UNDER THE LAW FOR THE TIME BEING IN
FORCE, OR

- THE ARBITRAL AWARD IS IN CONFLICT WITH

THE PUBLIC POLICY OF INDIA (FRAUD,
CORRUPTION, CONFIDENTIALITY NOT
MAINTAINED, RELIANCE OR INTRODUCTION AS
EVIDENCE, THE SUBJECT OF THE CONCILIATION
PROCEEDINGS).
TIME LIMIT FOR APPLICATION TO SET ASIDE

 THREE MONTHS FROM THE DATE THE

PARTY HAD RECEIVED THE AWARD OR
ADDITIONAL AWARD (CORRECTION AND
INTERPRETATION)

 IF
COURT IS SATISFIED ABOUT THE CAUSE
FOR THE DELAY BY THE APPLICANT, IT
COULD ENTERTAIN THE APPLICATION
WITHIN A FURTHER PERIOD OF 30 DAYS
BUT NOT THEREAFTER.
FINALITY OF AWARD
 FINAL AND BINDING ON THE PARTIES.

ENFORCEMENT
 AWARDENFORCED UNDER CODE OF CIVIL
PROCEDURE 1908 IN THE SAME MANNER AS IF
IT WERE A DECREE OF THE COURT.

LIMITATION
 LIMITATION ACT 1908
SHALL APPLY TO
ARBITRATIONS AS IT APPLIES TO
PROCEEDINGS IN COURT.
L) ARBITRATION
ADVANTAGES
- COURT FEE
- SPEEDY SETTLEMENT
- CONTINUING BUSINESS
- RELATIONSHIP
- CONFIDENTIALITY
ARBITRATION AND CONCILIATION ACT 1996
Arbitration and Conciliation Act 1996 replaced Arbitration Act
1940, Foreign Awards (Recognition and Enforcement) Act 1961,
Object: To consolidate and amend the law relating to domestic
arbitration, and enforcement of foreign arbitral awards as also to
define the law relating to conciliation and for matters connected
therewith or incidental thereto.
Act of 1996 incorporates the core of the Model Law on
International commercial Arbitration adopted by the UN
Commission on International Trade Law (UNCITRAL) in 1985.
The UN General Assembly has recommended that all countries
give due consideration to the said Model Law in view of the
desirability of uniformity of the Law of arbitral procedures and
specific needs of international commercial arbitration practice.
The said Model and Law Rules make significant contribution to
the establishment of a unified frame work for fair and efficient
settlement of disputes arising in international commercial
relations.
* MAJOR CHANGES IN THE NEW ACT
- CONCEPT OF CONCILIATION
- SPEAKING AWARD
- CONCEPT OF PRESIDING ARBITRATOR VS. UMPIRE
- INSTITUTIONAL ARBITRATION
- FILING OF AWARD IN COURT VS. DIRECT ENFORCEMENT
- TIME LIMITS
- FINALITY OF AWARDS AND APPEALS
- INTERNATIONAL ARBITRATION AND FOREIGN AWARDS

* CASE LAW
- ARBITRATION AGREEMENT
- INCLUSION / EXCLUSION OF ARBITRATION CLAUSE IN A
CONTRACT
SUBMISSION FOR EXPERT VIEW IN
GOVERNMENT SECTOR

GOVERNMENT ISSUED EXECUTIVE ORDERS

THAT INTER DEPARTMENTAL COMMERCIAL
DISPUTES, BETWEEN GOVERNMENT
DEPARTMENTS AND PUBLIC SECTOR
UNDERTAKINGS, ONE PUBLIC SECTOR
UNDERTAKING AND ANOTHER PUBLIC SECTOR
UNDERTAKING OR BETWEEN AUTONOMOUS
ORGANISATIONS AND PUBLIC SECTOR
UNDERTAKINGS (EXCLUDING DISPUTES ON
INCOME TAX, CUSTOMS AND EXCISE) SHOULD
NOT BE RESOLVED BY FILING SUITS AGAINST
EACH OTHER OR RESORTING TO ARBITRATION.
GOVERNMENT HAD IN FEBRUARY
1989 DECIDED THAT A PERMANENT
MACHINERY OF ARBITRATORS (PMA)
BE SET UP IN THE DEPARTMENT OF
PUBLIC ENTERPRISES (DPE) FOR
SETTLEMENT OF COMMERCIAL
DISPUTES BETWEEN PUBLIC SECTOR
ENTERPRISES INTERSE AND PUBLIC
SECTOR ENTERPRISE(S) AND
GOVERNMENT DEPARTMENT(S)
In pursuance of this decision, BPE issued in
March 1989, an outline of the procedure to
be followed by the PSEs for referring the
matter to the PMA, as well as the procedure
to settle such disputes.
SPECIMEN ARBITRATION CLAUSE

In the event of any dispute or difference relating to the interpretation

and application of the provisions of the Contract, such dispute or
difference shall be referred by either party to the Arbitration of one of
the Arbitrators in the Department of Public Enterprises to be
nominated by the Secretary to the Government of India in charge of
the Bureau of Public Enterprises. The Arbitration Act 1940 shall not
be applicable to the arbitration under this clause. The award of the
Arbitrator shall be binding upon the parties to the dispute, provided,
however, any party aggrieved by such award may make a further
reference for setting aside or revision of the award to the Law
Secretary, Department of Legal Affairs, Ministry of Law and Justice,
Government of India. Upon such reference the dispute shall be
decided by the Law Secretary or the Special Secretary/Additional
Secretary when so authorized by the Law Secretary whose decision
shall bind the parties finally and conclusively. The parties to the
dispute will share equally the cost of arbitration as intimated by the
Arbitrator.
The procedure laid down interalia included
the following:
After entering upon the reference, the
arbitrator will call for the papers,
statements/comments from the parties and
will hear the parties in person as and when he
deems necessary. The arbitrator will also
intimate to the parties, the estimated amount
of arbitration fees to be borne equally by them
and paid within a month of intimation to the
parties. All payments should be made to the
government of India through Demand Draft
or other means as indicated by the arbitrator.
No outside lawyers shall be allowed to
appear on behalf of the parties to argue
their cases before the arbitrator but the
parties can take the help of their own full
time law officers. Subject to the aforesaid,
the procedure to be followed in the
arbitration procedure to be followed in the
arbitration proceedings shall be
determined by the arbitrator and the Law
Secretary as the case may be.
The arbitrator shall make his award within
six months after entering upon the
reference or after having been called upon
to act by notice in writing from any party
to the arbitration agreement or within
such extended time as the parties may
allow. The arbitrator may also, if he thinks
fit, make an interim award.
The Arbitrator shall make a speaking
award. The award may be published on
plain paper.

At the time of communicating the award,

the arbitrator shall fix the final amount of
arbitration fees to be paid equally by the
parties within one month of such
communication or within such time as
may be allowed by the arbitrator in this
regard.
In OM dated 31 December 1991of GOI, it was
stated:
“In a civil appeals case between the ONGC and the
collector of Central Excise Bombay, the Supreme
Court (Judgment dated 11 Oct 1991) had taken
adverse notice of Public Sector undertakings
pursuing litigations in court by spending money on
fees etc. and wasting public time not withstanding
Court’s repeated observations to the Contrary in past
cases. In the aforesaid case, the Supreme Court has
directed that a committee under the Control of
Cabinet Secretary shall be set up to ensure that no
litigation reaches the court or a Tribunal without the
matter having been first examined by the Committee.
Accordingly, it was decided to constitute a
committee consisting of:
1. Cabinet Secretary
2. Secretary Department of Industrial
Development
3. Secretary Department of Public
Enterprises.
4. Secretary, Department of Legal Affairs.
5. Finance Secretary
6. Secretary of the concerned Ministry/
Department
It was also reiterated that DPE’s instructions
dated 30.3.89 need to be strictly followed in all
cases. If no final decision can be arrived at,
following the said instructions, the concerned
Ministry/ Department or the concerned PSE
through their administrative Ministry/
Department should refer such cases to the
Cabinet Secretariat with a self contained note for
being placed before the committee on Disputes
(CoD). Further, it was to be ensured that no
litigation involving such disputes is taken up in a
court or a Tribunal without the matter having
been first examined by the above constituted
committee and the committee’s clearance for
litigation is obtained.
The supreme Court, in a subsequent order
dated 7th Jan 1994 issued clarifications so
that misconceptions arising out of the
memo of the Cabinet Secretariat, referred to
in the Judgment of Oct 1991, are removed.
The gist of the order was:
a. As far as possible, controversies
between a Ministry and a Ministry, a
Ministry and a PSU and between PSUs
themselves are resolved by recourse to the
High Power Committee and that time
consuming and expensive Litigation is
avoided,
b. The order of this Court is not to the
effect that – nor can that be done – so far as
union of India and its statutory corporations
are concerned, their statutory remedies are
effaced. The purpose of the constitution of
the High Power Committee was not to take
away those remedies. The Machinery
contemplated is only to ensure that no
litigation comes to court without the parties
having had an opportunity of conciliation
before an in house committee.
c. There shall be no bar to the lodgement
of an appeal or petition either by the
union of India or PSUs before any court
or tribunal, so as to save limitation. But
before such filing, every endeavour
should be made to have the clearance of
the High Power Committee.
d. Wherever appeals, petitions etc. are
filed without the clearance of the High
Power Committee, so as to save limitation,
the appellant or the petitioner, shall within
a month of such filing, refer the matter to
the High Power Committee. After such a
reference, the operation of the order or
proceedings under challenge shall be
suspended till the committee resolves the
dispute or gives clearance to the litigation.
In OM dated 24.1.1994, the Government of
India also issued instructions in the light of
the Supreme Court order of 7.1.1994

The DPE also issued fresh procedural

instructions about PMA, on 22.1.2004. The
clause about Arbitration includes : “The
Arbitration & Conciliation Act 1996 shall
not be applicable to Arbitration under this
clause.”
(instead of Arbitration Act 1940)
SUBMISSION FOR EXPERT VIEW
IN PRIVATE SECTOR
ALSO RESORT TO EXPERT VIEW INSTEAD
OF ARBITRATION TO RESOLVE DISPUTES.
DISPUTES REFERRED TO A STEERING
COMMITTEE OF BOTH PARTIES.
IF THE STEERING COMMITTEE IS
UNABLE TO RESOLVE THE DISPUTES,
REFERRED TO MANAGING DIRECTORS
WHOSE DECISION WILL BE FINAL.
IN SUCH CASES ALSO TERM
‘ARBITRATION’ IS USED WHICH IS NOT
LEGALLY CORRECT.
 SPECIMEN CLAUSE IN A PRIVATE
ORGANISATION
 AMICABLE SETTLEMENT THROUGH MUTUAL
DISCUSSIONS, WITHIN 30 DAYS, ..”WHETHER IT IS
REFERRED TO ARBITRATION OR NOT”. ANOTHER
SUB CLAUSE STATES “COMPETENT COURT IN CITY
OF … SHALL HAVE JURISDICTION TO DEAL WITH
DISPUTE PROCEEDINGS”.
 GIVES AN IMPRESSION THAT IF THE DISCUSSIONS
FAIL TO RESOLVE THE DISPUTE, WITHIN 30 DAYS,
THE ROUTE OF GOING TO COURT IS CHOSEN FOR
RESOLVING THE DISPUTE AS ARBITRATION HAS NOT
BEEN MENTIONED AS THE MECHANISM FOR
RESOLUTION OF DISPUTES.
 CONTRADICTIONS, AMBIGUITIES AND CONFUSION!
 ANOTHER CONTRACT – PRIVATE
SECTOR

“ARBITRATION OF DISPUTE BY SOLE

EXPERT”.
ISSUES – SUBMISSION FOR EXPERT VIEW

The issues that arise here are:

a. is it correct to refer to this as
Arbitration and
b. if not what is the difference between
Arbitration and Submission for Expert
view.
These were answered by the
Supreme Court in a verdict in 1998.
Other Issues about Arbitration –
Attributes of an Arbitration
Agreement. (Mustill & Boyd -
Commercial Arbitration)
Judgment of Supreme Court (1998)
– 3 SCC 573
 Some Attributes required to be present for an
agreement to be considered as an Arbitration
Agreement.
 Arbitration Agreement must contemplate that
decision of Tribunal will be binding on the
parties to the agreement.
 Jurisdiction of the Tribunal to decide the rights
of parties must derive from consent of the
parties or from an order of the court or from a
statute, the terms of which make it clear that
the process is to be an arbitration.
 Agreement to contemplate that substantive
rights of parties will be determined by the
agreed tribunal.
 Tribunal to determine the rights of the parties
in an impartial and judicial manner with the
tribunal owing an equal obligation of fairness
towards both sides.
 Agreement of parties to refer their disputes to
the decision of the tribunal must be intended to
be enforceable in law.
 Agreement to Contemplate that the tribunal will make
a decision upon a dispute which is already formulated
at the time when a reference is made to the tribunal.
 Whether Agreement Contemplates that the tribunal
will receive evidence from both sides and hear their
contentions or at least give the parties an opportunity
to put them forward; whether the wording of the
agreement is consistent or inconsistent with the view
that the process was intended to be an arbitration; and
whether the agreement requires the tribunal to decide
the dispute according to law.
 Distinction between an expert
determination and arbitration.
(Russel on Arbitration)
 Matter of construction of the contract, involving an
objective enquiry into the intention of the parties.
 Express words of the disputes clause.
 If specific words such as “Arbitrator”, “Arbitral
Tribunal”, “Arbitration”; OR “as an expert and not
as an arbitrator” are used to describe the manner in
which the dispute resolver is to act,
 they are likely to be persuasive although not always
conclusive, where there is no express wording, court
will refer to certain guidelines-
- Most important used to be, whether there was an
“issue” between the parties such as the value of an
assets on which they had not taken defined positions
in which case the procedure was held to be expert
determination; or a “formulated dispute” between the
parties where defined positions had been taken, in
which case the procedure was held to be an
arbitration. This imprecise concept in still being relied
upon. It is unsatisfactory because some parties to
contract deliberately choose expert determination for
dispute resolution.
- Next guideline – Judicial function of an
arbitral tribunal as opposed to the expertise
of the expert; An arbitral tribunal arrives at
the decision on the evidence and
submissions of the parties and must apply
the law, or, if the parties agree, on other
consideration; an expert, unless it is agreed
otherwise, makes his own enquiries,
applies his own expertise and decides on
his own expert opinion.
 Verdict
 While there are no conclusive tests, by and large,
one can follow a set of guidelines in deciding
whether the agreement is to refer an issue to an
expert or whether the parties have agreed to resolve
disputes through arbitration.
 Our courts have laid emphasis on i) existence of
disputes as against intention to avoid future
disputes; ii) the tribunal or forum so chosen is
intended to act judicially after taking into account
relevant evidence before it and the submission made
by the parties before it; and iii) the decision is
intended to bind the parties.
 Nomenclature used by the parties may not
be conclusive. One must examine the true
intent and purport of the agreement. There
are, of course, the statutory requirements of
a written agreement, existing or future
disputes, and an intention to refer them to
arbitration. (Section 2 of Arbitration Act
1940 and Section 7 of Arbitration and
Conciliation Act, 1996).
SUBSEQUENT DEVELOPMENTS IN
GOVERNMENT
Undoubtedly, the right to enforce a right
in a court of law cannot be effaced. As
appeals and special leave petitions
continued, the Supreme Court had set up a
mechanism, to ensure that no litigation
comes to court or to a Tribunal without
the matter having been first examined by
a committee and its clearance for
litigation.
Over a period of time, such disputes were referred
for resolution to DPE, and a Committee on
Disputes (CoD). The machinery contemplated was
to ensure that no litigation comes to court without
the parties having an opportunity of conciliation
before an in house committee. The Supreme Court
had also directed that in the absence of clearance
from the committee of secretaries, any legal
proceedings will not be proceeded with.
The object was to ensure that resources of
the State are not frittered away in inter se
litigations between entities of the State, which
could be best resolved by an empowered
committee on Disputes (CoD).
In other cases involving central
Government Departments and PSUs, the
Supreme Court had taken the same view. In
yet another case involving ONGC (Central
PSU) and CIDCO Maharashtra (State
Govt.) the Supreme Court in its judgment
dated 20.7.2007 directed the constitution of
a High powered Committee including the
Cabinet Secretary, Chief Secretary of the
State, Secretaries of the Concerned Depts.
of Union & States and CEOs of the
concerned undertakings, to take a decision
within 4 months.
 In a recent decision of a 5 judge bench,
(February 17, 2011) in an appeal case by a
Public Sector undertaking (Central Excise
matter) the Supreme Court observed based on
examples, (on same set of facts clearance was
given in one case and refused in the other,
leading to a special leave petition being
instituted by a PSU, on the ground of
discrimination), that the mechanism has not
achieved the results for which it was
constituted and has in fact led to delays in
litigation.
The Court therefore recalled its earlier
orders of 1991, 1994 and 2007. The
implication is that Disputes between
Government and its instrumentalities, may
not be referred to CoD and prior
permission of CoD is not required for
approaching the court.
INTERNATIONAL COMMERCIAL
ARBITRATION AND FOREIGN AWARDS
DEFINITION IN THE ACT:

INTERNATIONAL COMMERCIAL ARBITRATION:

ARBITRATION RELATING TO DISPUTES ARISING OUT OF
LEGAL RELATIONSHIP, WHETHER CONTRACTUAL OR NOT,
CONSIDERED AS COMMERCIAL UNDER THE LAW IN FORCE
IN INDIA AND WHERE AT LEAST ONE OF THE PARTIES IS :

a) AN INDIVIDUAL WHO IS A NATIONAL OF OR HABITUALLY

RESIDENT IN, ANY COUNTRY OTHER THAN INDIA;

b) A BODY CORPORATE INCORPORATED IN ANY COUNTRY

OTHER THAN INDIA;
c) A COMPANY OR AN ASSOCIATION OR A BODY OF
INDIVIDUALS WHOSE CENTRAL MANAGEMNENT AND
CONTROL IS EXERCISED IN ANY COUNTRY OTHER
THAN INDIA; OR

d) THE GOVERNMENT OF A FOREIGN COUNTRY.

 FOREIGN AWARDS
(PART II OF THE ACT)
Four parts in the Arbitration and Conciliation Act
1996:

Part I : Arbitration
Part II : Enforcement of certain
Foreign Awards
Chapter I – New York
Convention Awards
Chapter II – Geneva
Convention Awards
Part III : Conciliation
Part IV: Supplementary Provisions
Interpretation of the Legal Aspects of Foreign
Award by Supreme Court :

a) Part I of the Act also applies 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.
b) Part I of the Act is applicable to an award
even though it is Foreign Award.
 Part II of the Act
Definition in the Act (Sections 44 and Section 53)

Foreign Award means an arbitral award on differences

between persons arising out of legal relationships, whether
contractual or not, considered as commercial under the
law in force in India, in pursuance of an agreement in
writing for an arbitration to which the New York
convention / Geneva convention applies.

Cont…
When Foreign Award binding (Both conventions’
Chapter I and Chapter II)
Any foreign award which would be enforceable
under this Chapter shall be treated as binding for
all purposes on the persons as between whom it
was made, and may accordingly be relied on by
any of those persons by way of defence, set off or
otherwise in any legal proceedings in India and
any references in this chapter to enforcing a
foreign award shall be construed as including
references to relying on an award.

Cont…
Conditions for an enforcement of foreign awards
(Section 48 – New York Convention)

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 proof that
A) the parties to the agreement 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
 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 he
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 matter 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 of the country in which, or
under the law of which, the 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.

Cont…
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 effected by fraud or corruption.
 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
subsection (1), the court may, if it considers it
proper, adjourn the decision on the enforcement
of the award and may also, on application of the
party claiming enforcement of the award, order
the other party to give suitable security.

Cont…
 Conditions of Enforcement of foreign
awards (Geneva Convention Chapter II)
 1) In order that a foreign award may be
enforceable under this chapter, it shall be
necessary that –
The award has been made in pursuance of a
submission to arbitration which is valid under the law
applicable thereto;
The subject matter of the award is capable of
settlement by arbitration under the law of India;
The award has been made by the arbitral tribunal
provided for in the submission to arbitration or
constituted in the manner agreed upon by the parties
and in conformity with the law governing the
arbitration procedures;
The award has become final in the country in which it has
been made, in the sense that it will not be considered as
such if it is open to opposition or appeal or if it is proved
that any proceedings for the purpose of contesting the
validity of the award are pending;
The enforcement of the award is not contrary to the public
policy or the law of India
Explanation: without prejudice to the generality ……. an
award is in conflict with the public policy of India if the
making of the award was induced or effected by fraud or
corruption.

Cont.
2) Even if the conditions laid down in sub
section (1) are fulfilled, enforcement of the award
shall be refused if the court is satisfied that –
The award has been annulled in the country in which it was
made;
The party against whom it is sought to use the award was
not given notice of the arbitration proceedings in sufficient
time to enable him to present his case; or that, being under
a legal incapacity, he was not properly represented;
The award does not deal with the differences contemplated
by or falling within the terms of the submission to
arbitration or that it contains decisions of matters beyond
the scope of the submission to arbitration;
Provided that if the award has not covered
all the differences submitted to the arbitral
tribunal, the court may, if it thinks fit,
postpone such enforcement or grant it
subject to such guarantee as the court may
decide.

Cont.
3) If the party against whom the award has been
made proves that under the law governing the
arbitration procedure there is a ground, other than
the grounds referred to in clauses (a) and (c) of
sub section 1 and clauses (b) and (c) of sub
section 2 entitling him to contest the validity of
the award, the court may, if it thinks fit, either
refuse enforcement of the award or adjourn the
consideration there of, giving such party a
reasonable time within which to have the award
annulled by the competent tribunal.
Enforcement of Foreign awards
(New York convention & Geneva
Convention)
Where the court is satisfied that the
foreign award is enforceable under this
chapter, the award shall be deemed to
be a decree of that court.

Cont.
Appealable orders (New York Convention
and Geneva Convention)
1. An appeal shall lie from the order refusing:-
a. To refer the parties to arbitration under Section45 and 54
of the two conventions respectively
b. To enforce a foreign award under sections 48 and 57 of
the two conventions respectively, to the court authorized
by law to hear appeals from such order.
2. No second appeal shall lie from an order passed in appeal under
this section, but nothing in this section shall affect or take away
any right to appeal to the Supreme Court.
International Commercial
Arbitrations and Foreign Awards
Judgment of Supreme Court (13.03.2002)
– Civil Appeal 6527 of 2001 against
Judgment dated 10.10.2000 of Madhya
Pradesh High Court.
Bhatia International Vs Bulk Trading SA
& Another.
Case
 Contract dated 9th May 1997 between Bhatia
International (appellant) and Bulk Trading
(respondent).
 Arbitration clause in contract provided that
arbitration to be as per the rules of the
International Chamber of Commerce (ICC).
 Respondent filed request for arbitration with
ICC on 23.10.1997.
 Parties agreed on the venue as Paris, France
• Sole Arbitrator appointed by ICC.
• Respondents’ application under Section 9 of
the Arbitration and Conciliation Act (9.
Interim measures by court – A party may,
before or during arbitral proceedings or at any
time after the making of the arbitral award but
before it is enforced in accordance with
Section 36, apply to a court……..) before III
Additional District Judge, Indore, Madhya
Pradesh, against the appellant and the 2nd
Respondent.
• One of the interim reliefs sought: order of
injunction restraining these parties from
alienating, transferring and/or creating third
party right, disposing of, dealing with and/or
selling their business assets and properties.
• Opposed by Appellant on the question of
maintainability of such an application.
• Appellants’ Contention: Part I of the Act will
not apply to arbitration where the place of
Arbitration is not in India.
• Contention dismissed by the Judge
(01.02.2000), holding that the court at
Indore had jurisdiction and the application
was maintainable.
• Writ petition by Appellant before High
Court of Madhya Pradesh, Indore Bench.
• Writ petition dismissed by High Court
(10.10.2000).
• Appeal to Supreme Court.
• Supreme Court examined the language used in various
sections in great detail: Viz sub section (2) of Section
2(Part I would apply where the arbitration is in India);
Sub Section (4) of section 2 (This part shall apply to
every arbitration); Sub Section (5) of Section 2 (This
part shall apply to all arbitrations); Sub Section (7) of
Section 2 (Award made under this part shall be
considered as a domestic award); Art 1(2) of Uncitral
Model Law Vis a Vis Section 2(2) of the Act (The part
shall apply where the place of arbitration is in India) and
Section 9 (Interim Measures – application to court –
“before”, “during the arbitral proceedings” and “ after an
award is made”); and rules of ICC (Art 23 of ICC Rules
– Conservatory and Interim measures permits
application to a competent judicial authority for interim
and conservatory measures)
Issues:-
Are awards flowing out of International
Commercial Arbitration held outside India
“Foreign Awards”, governed only by the
provisions in Part-II of the Act
(Enforcement of certain Foreign Awards –
New York Convention Awards and
Geneva Convention Awards) and do they
exclude applicability of Part I of the Act –
“Arbitration”?
Verdict:-
The definition of “International
Commercial Arbitration” in the
Arbitration and Conciliation Act 1996,
makes no distinction between
International Commercial Arbitrations
which take place in India or International
Commercial Arbitrations which take place
outside India.
• The definition of court in the Act is one which
would have Jurisdiction in respect of the
subject matter of the arbitration if the same had
been the subject matter of a suit. The definition
does not provide that the courts in India, will
not have Jurisdiction if an International
Commercial arbitration takes place outside
India. Courts in India would have jurisdiction
even in respect of an international commercial
arbitration. An ouster of jurisdiction has to be
express.
Sub Section (2) of Section(2) provides
that Part I would apply where the
arbitration is in India. It is not providing
that Part I shall not apply where the place
of arbitration is not in India. It is also not
providing that Part I will “only” apply
where the place of arbitration is in India.
The use of the language is significant and
important
By omitting to provide that Part I will not
apply to International Commercial
Arbitration which take place outside
India, the effect would be that Part I
would also apply to International
Commercial Arbitration held out of India.
• If a statutory provision is open to more than one
interpretation, then the court has to choose that
interpretation which represents the true intention
of the legislature. This task is often not an easy
one. At the same time it must be borne in mind that
it is impossible even for the most imaginative
legislature to forestall exhaustively situations and
circumstances that may emerge after enacting a
statute where its applications may be called for. It
is in such a situation the courts duty to expound,
arises, with a caution that the Court should not try
to legislate.
Notwithstanding the conventional principle that the
duty of Judges is to expound and not to legislate, the
courts have taken the view that the judicial art of
interpretation and appraisal is imbued with creativity
and realism. Courts are therefore held as “finishers,
refiners, and polishers of legislatures which gives
them in a state requiring varying degrees of further
processing. If a language used is capable of bearing
more than one construction, in selecting the true
meaning, regard must be had to the consequences,
resulting from adopting the alternative constructions.
A construction that results in hardship, serious
inconvenience, injustice, absurdity or anomaly or
which leads to inconsistency or uncertainty and
friction in the system which the statute purports to
regulate has to be rejected and preference should be
given to that Construction which avoids such results.
In selecting out of different interpretations, the court
will adopt that which is just, reasonable , and
sensible rather than that which is none of those
things, as it may be presumed that the legislature
should have used the word in that interpretation
which least offends our sense of justice.
• To conclude we hold that – 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
(derogate = detract from)
– 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.
• 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 holding that Part I of the Act would not
apply to arbitrations which take place outside
India. (The only High Court which held that
Part I applies to arbitrations which take place
outside India is the Madhya Pradesh High Court
which was the subject matter of this appeal to
the Supreme Court).
However, a proper and conjoint reading of all provisions
indicates that Part I is to apply also to international
commercial arbitrations which take place out of India,
unless the parties by agreement, express or implied
exclude it or any of its provisions. Such an
interpretation does not lead to any conflict between any
of the provisions of the said Act. On this interpretation,
there is no lacunae in the said Act. This interpretation
also does not leave a party 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.
In this view of the matter, we see no
reason to interfere with the impugned
judgment (of the Madhya Pradesh High
Court)
Contesting Foreign Awards – Filing suits in
India against a Foreign Arbitration Award
 Judgment of Andhra Pradesh High Court
(27.02.2007)

Judgment of Supreme Court (Civil Court

Appeal 309 of 2008 (10.01.2008)

Venture Global Engg Michigan, USA (VGE)

Vs
Satyam Computer Services Ltd & another,
Secunderabad, Andhra Pradesh (SCSL)
Case:
VGE and SCSL entered into a Joint
Venture Agreement (20.10.1999) to
constitute Satyam Venture Engg Services
Ltd, (SVES), with 50% equity share
holding by each of them in SVES. A
shareholders Agreement (SHA) was also
executed.
 Section 11.05(b) of SHA provided that the
Agreement shall be construed in accordance
with and governed by the laws of the State of
Michigan, USA, without regard to the
conflicts of law / rules of such jurisdiction.
Disputes between the parties that cannot be
resolved via negotiations shall be submitted
for final, binding arbitration to the London
Court of International Arbitration (LCIA).
 Section 11.05(c) provided that not withstanding
any thing to the contrary in this agreement, the
share holders shall at all times act in accordance
with the Companies Act and other applicable
Acts / Rules being in force in India at anytime.
 Disputes between the parties (Feb 2005). SCSL
contended that VGE had committed an event of
default under the SHA owing to several venture
companies becoming insolvent; SCSL had
exercised its option to purchase VGE’s shares in
SVES at book value
 SCSL filed request for arbitration with LCIA
(25.07.05)
 LCIA appointed a sole Arbitrator (10.09.05);
proceedings held in London.
 Arbitrators’ award (03.04.06):
a) VGE to deliver to SCSL share certificate in form
suitable for immediate transfer to SCSL or its
assignee, evidencing all of VGE’s ownership
(Legal and/or beneficial) in SVES. VGE to do all
that may otherwise be necessary to effect the
transfer of such ownership to SCSL or its assignee.
(b) SCSL to pay VGE $ 622, 656 plus
interest.
(c) VGE to pay SCSL £ 48,777 plus
$14,88,454 along with interest @5%
p.a. compounded annually till
payment.
(d) SCSL released from its obligation
(under the non-compete agreement) not
to compete with SVES or VGE with
respect to Engineering services to the
automotive industry.
SCSL filed (14.04.06) a petition seeking
enforcement of the foreign arbitration
award passed by the LCIA, in the US
District Court for the Eastern District of
Michigan
Cross Petition before the court by VGE to
refuse and deny the enforcement of the
award.
 Enforcement objected as the Award ordering
transfer of shares was in violation of Indian Laws
and Regulations specifically the Foreign Exchange
Management Act, 1999 (FEMA). Petition
scheduled to be heard on 04.05.2006 by US District
Court.
 US District Court passed its final judgment on
31.07.2006.
 VGE filed a suit before 1st additional Chief Judge,
City Civil Court, Secunderabad (28.04.2006)
seeking declaration to set aside the award and
permanent injunction on the transfer of shares under
the award.
 District Court passed an ad interim exparte
order of injunction, inter alia restraining SCSL
from seeking or effecting transfer of shares
either under the terms of the award or
otherwise.
 SCSL filed an appeal before AP High Court
challenging the District Courts’ order.
 High Court admitted SCSL’s appeal, directed
interim suspension of order of District Court
but made it clear that SCSL would not effect
the transfer of shares until further orders.
 When the case resumed in the District
Court (13.07.2006), that Court upheld the
Petition of SCSL for rejection of the suit
of VGE.
 VGE filed an appeal in AP High Court
against the District Courts’ order,
contending that no other remedy was
available to challenge the award except to
file a suit under Section 9 of Code of Civil
Procedure, 1908.
 High Court dismissed (27.02.2007) the appeal
of VGE holding that the award cannot be
challenged even if it is in contravention of
statutory provisions. Also held that where the
parties expressly agree, conferring jurisdiction
on any court belonging to any country and
submit to the law of such particular country to
which either party belongs, they shall be
governed by such law. Section 11.05(b) of
SHA made it clear that the laws
of the State of Michigan, USA subject to other
conditions mentioned therein, would govern the
agreement. Clause (c) of section 11.05 made it clear
that the shareholders would at all times act only in
accordance with the Companies Act and other
applicable Acts and Rules that are in force, in India,
at any time, notwithstanding anything to the contrary
in the said agreement. VGE having already invoked
the alternative efficacious remedy by invoking the
jurisdiction of the foreign court and resisted
enforcement of the award, it could not file a suit and
resist the enforceability of the award.
The continuation of the proceedings by way
of a suit would defeat the very fundamental
object of the 1996 Act in the nature of
“alternative disputes redressal system”.
Therefore VGE having submitted to
arbitration clause and that too after passing
of the award, could not be permitted to avail
of the procedure under the code of civil
procedure. We are of the considered view
that VGE in the present appeal cannot ride
two horses at a time.
 Order of trial court rejecting the suit as not
maintainable, confirmed. The order of status
quo dated 12.02.2007 of the High Court
vacated.
 Appeal by VGE to Supreme Court (Special
Leave Petition).
 Judgment
 Foreign award passed outside India cannot
be said to be not enforceable in India by
invoking the provisions of the Act or the
CPC.
A situation may arise where even in respect of
properties situate in India, and where an award
would be invalid if opposed to the public policy
of India, merely because the judgment – debtor
resides abroad, the award can be enforced against
– properties in India through personal compliance
of the judgment – debtor and by holding out the
threat of contempt as is being sought to be done
in the present case. In such an event, the
judgment – debtor cannot be deprived of his right
under Section 34 to invoke the public policy of
India to set aside the award.
The public policy of India includes
a) The fundamental policy of India; or b) The interest
of India; or c) Justice or morality; or d) in addition, if
it is patently illegal. This extended definition of
public policy can be by-passed by taking the award
to a foreign country for enforcement – In Company
Law, the word ‘transfer’ has a definite connotation
which would require the ownership of the shares to
be transferred to the transferee, which would involve
the steps being taken under the Companies Act and
the rules and regulations there under, as well as the
Foreign Exchange Management Act, 1999 (FEMA).
SCSL in enforcing the Award passed by arbitration in a
foreign country, directing a foreign company, a
shareholder in joint venture company, (Indian company)
to transfer shares in favour of SCSL company in the US
District Court instead of Indian courts can be said to
have been motivated by the intention of evading the
legal and regulatory scrutiny to which this transaction
would have been subject to had it been enforced in
India. Therefore, SCSL was not prepared to enforce the
Award in spite of Intimate and close nexus to India and
its laws. VGE would certainly not be deprived of the
right to challenge the Award in Indian Courts.
 VGE having participated and consented in
proceedings filed in foreign court by SCSL for
execution of the award, would not be precluded
from reopening the very same issue by filing a
suit in a court. Moreover, when the High Court
in India restrained SCSL from effecting
transfer of shares pending further orders by the
City Civil Court, SCSL could not have
proceeded the issue before the foreign District
Court, without getting the said interim
orders/directions vacated.
 Section 11.5(b) and (c) of SHA between the parties
precluding SCSL from approaching Foreign Courts
in regard to the enforcement of the award cannot be
ignored lightly. The non-abstante clause in sub
section (c) of the said section would override the
entirety of the agreement including sub section (b)
which deals with settlement of the dispute by
arbitration. Sub section (c) therefore, would apply
for the enforcement of the Award, which declares
that, notwithstanding that the proper law or the
governing law of the contract is the law of the
concerned foreign state,
their shareholders shall at all times act in accordance with
the companies Act and other applicable Acts/Rules being
in force in India at anytime. Necessarily, the enforcement
has to be in India, as decided by this very section which
overrides every other section in the Shareholders
Agreement. SCSL, therefore totally violated the
agreement between the parties by seeking enforcement of
the transfer of shares in the Indian Company approaching
the Foreign Courts. The claim of SCSL that Sec 11.05(c)
of the SHA cannot be construed to mean that Indian Law
is a substantive law of the Contract or that Indian Law
would govern the dispute resolution clause in Sec
11.05(b) are not acceptable as non-abstante clause would
override the entirety of the agreement including Sub-
Section(b) which deals with
 the settlement of the dispute by arbitration and
therefore, Section 3 would apply to the enforcement
of the award. In such an event, necessarily
enforcement has to be in India as declared by the
very section which overrides every other section.
 The above-mentioned relevant aspects, the legal
position as set out in three-judge bench decision in
Bhatia International, specific clause in the
Shareholders Agreement (SHA), conduct of the
parties have not been properly adverted to and
considered by the trial court-as well as the High
Court.
Accordingly, both the orders passed by the trial court
as well as the High Court are set aside. In terms of
the decision in Bhatia International, we hold that
Part I of the Act is applicable to the award in
question even though it is a Foreign Award. We have
not expressed anything on the merits of claim by
both the parties, particularly the stand taken by VGE
for setting aside the award. It is for the concerned
court to decide the issue on merits and we are not
expressing anything on the same. The present
conclusion is only with regard to the main issue
whether the aggrieved party is entitled to challenge
the foreign award which was passed outside India, in
terms of Section 9/34 of the Act.
The three judge bench decision is an answer to the
main issue raised (that Part I of the Act would apply
even for foreign awards). Since from the inception of
ordering notice in the special leave petition, both
parties were directed to maintain status quo with
regard to transfer of shares in issue, the same shall be
maintained till the disposal of the suit. Considering
the nature of dispute which relates to an arbitration
Award, we request the concerned court to dispose of
the suit on merits one way or the other within a period
of six months of the date of receipt of copy of this
judgment .
Civil Appeal is allowed to this extent.
 Civil Appeal No 7562 of 2011
before Supreme Court

Yograj Infrastructure Ltd (Appelant)

Vs
SSANGYONG Engineering and Construction Co. ltd
(Respondent)
 CASE
 Contract dated 12th April 2006 for Rs. 219.01 crores
awarded by NHAI to SSY (a Korean firm). SSY
awarded Subcontract dated 13th August 2006 to
yograj, agreeing to pass on 92% of all payments
received to SSY. Clause 27 in the agreement was the
Arbitration clause. Clause 27.1 provided that the
Arbitration proceedings shall be conducted in English
in Singapore in accordance with the Singapore
international Arbitration Centre (SIAC) Rules. Clause
27.2 stipulated that the Arbitration shall take place in
Singapore. Clause 28 stipulated that the Agreement
shall be subject to the laws of India.
Yograj furnished to SSY performance Bank
Guarantee for Rs. 6.05 crores and three Bank
Guarantees totaling Rs. 5 Crores against
Mobilisation Advance.SSY issued on 22 nd
September 2009 a notice of termination of the
Agreement, inter alia on the ground of delay in
performing the work under the Agreement (Clause
23.2)
Thereafter, the parties entered into settlement talks
as provided in clause 26 of the Agreement. The
settlement talks failed on 28th September 2009.
 Yograj filed an application on 30th December 2009 before
District and Sessions Judge, Nansinghpur, Madhya Pradesh
under Section 9 of the Arbitration and conciliation Act
1996,praying for interim reliefs. SSY also filed an application on
the same day under Section 9 of the Arbitration and Conciliation
Act, before the same court also for interim reliefs. The District
judge by his order dated 10th March 2010 directed the applicant
to submit the case before the Arbitrator in Singapore.
 Dispute between the parties was referred to Arbitration on 20 th
May 2010, and a Sole Arbitrator was appointed by the Singapore
International Arbitration Centre. Both parties filed applications
on 4th June and 5th June respectively for interim reliefs. Arbitrator
passed interim orders on 29th June, 2010 generally in favour of
SSY with the objective of enabling the construction on the
Project to continue, while arbitration proceedings continued.
 Aggrieved by the interim order, Yograj filed appeal on 2 July 2010 before
District and Sessions Judge Nansinghpur under Section 37(2)(b) of the
Arbitration and conciliation Act 1996, for setting aside the interim order
of the Arbitrator. Contested by the other party as not maintainable since
the arbitration was in Singapore and the proceedings were governed by
the laws of Singapore. District Judge accepted the submission and
dismissed the appeal on 23rd July 2010 as not maintainable.
 Yograj moved a Civil Revision petition on 26th July 2010 before the
Jabalpur bench of Madhya Pradesh High Court. The High Court held that
proceedings had been initiated under Section 9 of the Act by the parties in
the Court of District Judge, before the matter was referred to Arbitration.
The High Court also held that by express agreement, Parties had ousted
the Jurisdiction of the Indian Courts, while the arbitration proceedings
were subsisting. The High Court dismissed the case on 31st August 2010.
 Against the order of the High Court, Special leave petition was filed by
Yograj before the Supreme Court.
Counsel for Appellant in the Supreme Court
 Part I of the 1996 Act has not been excluded by clause 27 of
the Agreement and the 1996 Act would therefore apply to the
said Agreement. (Decisions of Supreme Court in Bhatia
international Vs Bulk Trading SA (2002) and Venture Global
Engg Vs Satyam Computer Service Ltd (2008) ).Clause 28 of
the Agreement expressly provides that the Agreement would
be subject to the laws of India. Accordingly on account of the
application of Part I of the 1996 Act, the International
Arbitration Act,2002 of Singapore would have no application
to the facts of the case though the conduct of the proceedings
of arbitration would be governed by the SIAC rules.
 Respondent had also filed an application under Section 9 of
the 1996 Act,(Interim measures etc by court) and thus
accepted the applicability of the 1996 Act.
 While the proper law of the arbitration would be the Arbitration and
Conciliation Act, 1996, the curial law (Law which governs the
procedural aspect of the conduct of the arbitration proceedings)
would be the SIAC Rules of Singapore, The difference in the two
concepts had been considered by the Supreme Court in Sumitomo
Heavy Industries Ltd VS ONGC (1998) and NTPC Vs Singer (1992)
in which the question for decision was what would be the law
governing the arbitration when the proper law of the contract and the
curial law were agreed upon between the parties. In the said cases the
Supreme Court had observed that in many circumstances the
applicable law would be the same as that of the proper law of contract
and the curial law, but it was not uncommon to encounter the
incumbent curial law in cases where the parties had made an express
choice of Arbitration in a jurisdiction which was different from the
jurisdiction with which the contract had the closest real connection.
 Counsel for Respondent
 On account of the failure of the appellant to complete the work
within the stipulated period of 30 months from the date of
commencement of work, the respondent who had suffered heavy
financial losses and damages on account of such breach, issued a
notice of termination pursuant to clause 23.2 in the Agreement.
Thereafter the parties entered into settlement talks as provided in
clause 26 of the Agreement. The settlement talks having failed,
clause 27 of the Agreement was invoked by both parties, to refer
the disputes to arbitration in accordance with the Singapore
International Arbitration Centre Rules (SIAC Rules). Both parties
filed applications before the Arbitrator, seeking interim relief under
Rule 24 of the SIAC rules.
 The Sole Arbitrator passed interim orders, recording that the object
was to allow the construction work on the project to continue, while
the parties waited for the outcome of the Arbitration proceedings.
 The appeal filed by the appelant before the District court, Narasinghpur under
section 37 of the Arbitration and conciliation Act 1996 had been dismissed on the
ground of maintainability and lack of jurisdiction. The civil revision filed against
this order was dismissed by the Madhya Pradesh High Court. The High Court
observed that under clause 27.1 of the agreement, the parties had agreed to resolve
their dispute under the provisions of SIAC rules which expressly or in any case
implicitly also adopted Rule 32 of the said Rules which categorically indicates that
the law of Arbitration under the said rules would be the international Arbitration
Act 2002 of Singapore.
 The counsel for respondents stated that the Seat of Arbitration was Singapore and
the arbitration proceedings would be continued in accordance with the SIAC rules.
It was also agreed that the proper law of the Agreement would be the Indian Law
and the proper law of the arbitration would be the Singapore International
Arbitration Act 2002 and the curial law would be Singapore law since the seat of
arbitration was in Singapore. The curial law, besides determining procedural
powers and duties of the Arbitrators, would also determine what judicial remedies
are available to the parties who wished to challenge the award once it had been
rendered and before it was enforced.
 In view of the Agreement between the parties, the Indian
Arbitration and Conciliation Act, 1996 would not apply to
the arbitration proceedings and the same would be governed
by the Singapore laws. In the case of Bhatia International,
the Supreme Court had held that parties by agreement,
express or implied, could exclude all or any of the provisions
of Part – I of the 1996 Act. The High Court had also held that
by express agreement the parties had ousted the jurisdiction
of the Indian Courts during the subsistence of the arbitration
proceedings. Accordingly it is only the laws of arbitration as
governed by the SIAC rules, which would govern the
arbitration proceedings, along with the procedural law, which
is the law of Singapore.
Judgment of Supreme Court (1st September 2011)

 The agreement between the parties specified that the arbitration

proceedings shall be conducted in English in Singapore in accordance with
SIAC rules. The agreement also specified that the agreement shall be
subject to the laws of India.
 There is therefore no ambiguity that the procedural law with regard to the
arbitration proceedings is the SIAC rules. Clause 27.2 makes it clear that
the seat of arbitration would be Singapore. The learned counsel for the
parties have quite correctly spelt out the distinction between the proper law
of the Contract and the curial law to determine the law which is to govern
the agreement itself. While the proper law is the law which is to govern the
agreement itself, in the absence of any other stipulation in the arbitration
clause as to which law would apply in respect of the arbitral proceedings, it
is now well settled that it is the law governing the contract which would
also be the law applicable to the Arbitral Proceedings. Clause 27.1 makes
it quite clear that the curial law which regulates the procedure to be
adopted in conducting the arbitration would be the SIAC Rules. The SIAC
rules would therefore be the curial law.
 The immediate question is whether in such a case, The provisions of Section 2(2)
of the Arbitration and conciliation Act 1996 which indicates that part –I of the
above Act would apply where the place of Arbitration in India, would be a bar to
the invocation of Sections 34 and 37 of the Act, as far as the present arbitral
proceedings, which are being conducted in Singapore are concerned.
 In Bhatia International, this court was of the view that Part – I of the Act did not
automatically exclude all foreign arbitral proceedings or awards, unless the
parties specially agreed to exclude the same. The decision of that above said case
would not have any application to this case, as the parties have categorically
agreed that the arbitration proceedings, if any, would be governed by the SIAC
rules as the Curial law, which included Rule 32. Rule 32 categorically provided:
where the seat of arbitration is Singapore, the law of the arbitration under these
rules shall be the International Arbitration Act, (Statutes of the Republic of
Singapore)
 Having agreed to the above, it was no longer available to contend that the proper
law of the agreement would apply to the arbitration proceedings. The decision in
Bhatia International VS Bulk Trading S.A., which was applied subsequently in
the case of Venture Global Engg VS Satyam Computers Services ltd and Citation
Infowares ltd. Vs Equinox Corporation would have no application.
 In the instant case, section 2 (2) of the 1996 Act, in fact indicates that
Part – I would apply only in cases where the seat of arbitration is in
India. In Bhatia International, this court, while considering the said
provision held that in certain situations , the provision of Part- I of the
aforesaid Act would apply even when the seat of arbitration was not in
India.
 As regards the effect of Section 42 (Jurisdition) of the 1996 Act, the
same in our view was applicable at the pre- arbitral stage, when the
arbitrator had not also been appointed. Once the arbitrator was appointed
and the arbitral proceedings were commenced, the SIAC rules become
applicable shutting out the applicability of Section 42 and for that matter
Part- I of the 1996 Act, including the right of appeal under Section 37
thereof.
 We are not, therefore, inclined to interfere, with the Judgment under
appeal and the appeal is accordingly dismissed and all interim orders are
vacated.
 There will be no order as to costs.
PROPOSAL BY GOVERNMENT OF INDIA TO AMEND THE
ARBITRATION & CONCILIATION ACT 1996 (APRIL 2010)

CONSULTATION PAPER (182 PAGES) WITH 7

ANNEXURES UNDER CIRCULATION
AIM: MAKE ARBITRATION A COST
EFFECTIVE AND EFFICIENT MEANS OF
ALTERNATE DISPUTE RESOLUTION
SWEEPING CHANGES IN THE EXISTING
LAW
CONCEPT OF CONFLICT OF INTEREST
(ARBITRATORS TO DISCLOSE IN
WRITING ON PAST OR PRESENT
RELATIONSHIP, DIRECT OR INDIRECT,
FINANCIAL, BUSINESS, PROFESSIONAL
OR SOCIAL RELATIONSHIP WITH EITHER
PARTY INVOLVED IN THE DISPUTE.
AMENDMENT TO POWERS OF COURTS
TO APPOINT INSTITUTION INSTEAD OF
ARBITRATOR. INSTITUTIONS HAVE
PANELS FROM WHICH INSTITUTE CAN
APPOINT.
ARBITRATION
“HOWEVER, THE WAY IN WHICH THE PROCEEDINGS
UNDER THE ACT ARE CONDUCTED AND WITHOUT AN
EXCEPTION CHALLENGED IN COURTS HAS MADE LAWYERS
LAUGH AND LEGAL PHILOSOPHERS WEEP. EXPERIENCE
SHOWS AND LAW REPORTS BEAR AMPLE TESTIMONY THAT
THE PROCEEDINGS UNDER THE ACT HAVE BECOME HIGHLY
TECHNICAL ACCOMPANIED BY UNENDING PROLIXITY, AT
EVERY STAGE PROVIDING A LEGAL TRAP TO THE UNWARY.
INFORMAL FORUM CHOSEN BY THE PARTIES FOR
EXPEDITIOUS DISPOSAL OF THEIR DISPUTES HAS BY THE
DECISIONS OF THE COURTS BEEN CLOTHED WITH
‘LEGALESE’ OF UNFORSEEABLE COMPLEXITY.”

Justice D A Desai, Supreme

court
(Guru Nanak Foundation Vs Rattan Singh & Sons)
AIR 1981, SC 2075, 2076-77
INTERNATIONAL ARBITRATION –
NTPC Vs Singer Co.
– Foreign Award
– Law of Limitation
Key:
(1) Foreign Award and Jurisdiction of Indian
Courts
(2) Date of commencement of limitation period
in respect of a Breach of contract:

- Date on which original default occurred

OR
- Date on which claim for damages was
rejected
Case: Contracts dated 17.8.1982 between
NTPC and Singer Co.

(i) For designing, manufacturing, testing, and

supplying equipment and material on CIF
basis for a computer based Training
Simulator for NTPC’s Super Thermal Power
Plant at Korba (Value $ 38,10,154 plus Rs.
24,39,900)
Contd….
(ii) Executing the work of clearance and
handling at site, storage, erection, testing and
commissioning and fine tuning of the
Simulator at Korba (Value $ 242,512 plus
Rs. 9,38,997)
General Conditions of Contract:

(i) Laws Applicable to this contract to be the

laws in force in India. Courts of Delhi to
have exclusive jurisdiction in all matters
arising under this contract.

(ii) Settlement of Disputes amicably through the

engineer of NTPC, and in case of failure,
through Arbitration by ICC, Paris
Contd….
(iii) Date for completion 15.7.1984

(iv) In the event of a foreign contractor,

arbitration to be conducted by three
arbitrators-one each by the two parties and
the third to be named by the President of the
ICC, Paris; All Rules of Conciliation and
Arbitration of ICC to apply to such
arbitration; Arbitration to be conducted at
such places as the Arbitrators determine in
the case
Work actually completed on 01.2.1986

Singer Co. filed a claim with the Engineer of NTPC

on 04.11.1986, for damages of $3,085,187, caused by
various acts and omissions and breach of the terms of
the agreements by NTPC, including failure to provide
design data for the simulator by 14.8.1981; Resulted
in increased cost of performance by Singer Co.;
Order for hardware could not be placed in a timely
manner to keep pace with the delivery schedule;
Contd….
 Because of complex nature of manufacturing
the simulator, development work on other
aspects of project also delayed; Delay in
furnishing the data on the part of NTPC
resulted in 8 months wastage, causing
financial loss to Singer Co; Data furnished
was also inaccurate and deficient; Sub
standard conditions at the KORBA site
resulted in idling of Singer’s personnel at site
as well as increase in cost of coordination and
support at Headquarters of Singer Co.
NTPC’s engineer turned down Singer’s claim
on 26.12.1986
Singer referred the dispute to ICC for
Arbitration on 29.4.1987
NTPC initially failed to appoint an Arbitrator
Court of Arbitrations of ICC requested to take
up Arbitration
NTPC repudiated singer’s claim as legally
untenable being wholly barred by limitation.
 Counter claims, Rejoinders
 Terms of Reference approved by ICC on 13.9.1998
identified 11 issues to be decided in Arbitration
 Two issues out of these were:
(i) Whether reference to arbitration is bad by reason
of not being made within the time allegedly
prescribed by the contract and if not,
(ii) Whether the whole or part of Singer’s claims
are barred by limitation pursuant to the Arbitration
Act 1940 and the Indian Limitation Act 1908
Issues decided by the ICC Court at London
(09.8.1989) in the shape of an interim award
termed as ‘ Award Sentence’
- Held interalia that reference to Arbitration is
not bad by reason of not being made within
the time allegedly prescribed by the contract;
- Neither the whole nor any part of the
respondent’s claims are barred by time
limitation under Laws of India.
NTPC received copy of interim award on 04.10.1989
NTPC filed a petition for setting aside the award on
01.11.1989
Single Judge of Delhi High Court held on 23.5.1990
that the award was not governed by the Arbitration
Act 1940; the Arbitration Agreement on which the
award was made was not governed by the laws of
India; the award fell within the ambit of Foreign
Awards Act 1961; London being the seat of
Arbitration, English courts alone had jurisdiction to
set aside the award; and the Delhi High Court had no
jurisdiction to entertain the application filed under the
Arbitration Act, 1940.
Appeal by NTPC to Division Bench of High Court
dismissed on 12.2.1991
Special Leave Petition to Supreme Court by NTPC,
granted and appeal allowed on 07.5.1992
ISSUES:
Fundamental questions were whether the
Arbitration clause and the clause on governing
laws were mutually exclusive or whether the
latter overrode the Arbitration clause; whether
the Arbitration Agreement was governed by the
laws of India so as to save it from the ambit of
the Foreign Awards Act 1961 and attract the
provisions of the Arbitration Act 1940, which is
the law which governed the agreement on which
the award was made.
A ‘Foreign award’ is recognized and
enforceable in India as if it were an award
made on a matter referred to arbitration in
India. Such an award will be ordered to be
filed by a competent court in India which will
pronounce judgment according to the award
 Judgment:
Supreme Court held that the law expressly chosen by
the parties in respect of all matters arising under their
contract, which must necessarily include the
agreement contained in the arbitration clause, being
Indian Law and exclusive jurisdiction of the Courts
in Delhi having been expressly recognized by the
parties to the contract in all matters arising under it,
and the contract being most intimately associated
with India, the proper law of arbitration and the
competent courts were both exclusively Indian.
Contd….
The Foreign Awards Act 1961 had no application to
the award in question which was made on an
arbitration agreement governed by the laws of India.
All substantive rights arising under the agreement
including that contained in the arbitration clause were
governed by the Laws of India.
Supreme court finally held that the Delhi High
Court was wrong in treating the award in
question as a foreign award; directed the High
Court to consider NTPC’s application on
merits, on which Supreme Court would
express no views whatsoever

Delhi High Court heard case on merits

 Issues:
Singer Co’s contentions

- Arbitral Tribunal had only given its findings on

preliminary issues. There was thus no award

- Interim award was not filed by the Arbitrators in

the court as required in section 14 of the Arbitration
Act. NTPC filed it without any authority
Contd….
- According to Article 24 of the Rules of ICC, no
appeal against interim award or final award is
maintainable

- Award was on a question of law of limitation which

had specifically been referred for arbitration and
hence the award thereon was not challengeable

- Hence petition of NTPC to set aside the award

should be dismissed
 Judgment:
First three grounds rejected by High Court.

Fourth ground was one of the issues treated as part of

the terms of reference by ICC which held through an
interim award termed as ‘Award Sentence’ that the
claim and counter claim were not barred by limitation
Crucial questions
a) Whether the question of limitation was specifically
referred for adjudication by the Arbitrator.
b) Whether the starting point or cause of action for
arbitration and under the limitation Act were
different, and,
c) Whether the period of limitation would commence
to run even if the parties are not in a position to
invoke the arbitration clause as per the contractual
agreement, which provided the procedure for
settlement of claims mutually between the parties
ICC award recognized that there was a breach
of contract but was of the view that the breach
would occur only when payment was refused
and not at any point earlier. This was the basis
for its finding that Singer’s claims were not
barred by limitation
Delhi High Court held

Question of limitation was not one of the main

issues posed for arbitration but was referred to
incidentally in the pleadings and arguments.

Limitation would start from the date of breach

of contract and not when claims of Singer Co
were finally rejected by NTPC.
Contd….
Limitation would only run from the date of
breach, when the claim is founded on a breach
of contract or contractual obligation.

Remedy to claim compensation came to an

end on the expiry of three years from the dates
of breach (4.6.81, 10.7.81, 14.8.81, 16.10.81,
23.11.81 and 31.3.82).

Contd….
A different period of limitation would not be
applicable where there is a provision for
arbitration to lodge a claim and set arbitration
after the expiry of the period of limitation.

Award of ICC was based on application of

principles of law which were patently
erroneous and hence petition of NTPC was
liable to be allowed
Contd….
That part of the impugned award dated
09.8.1989, which holds that neither the
whole nor any part of the Singer Co’s
claims are barred by time limitation under
laws of India is quashed and set aside