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Sunday, March 19, 2017

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:- Parties agreed that the seat maybe outside India as may be fixed by the ICC; and 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
                 (Arising out of SLP (C) No. 34009 of 2013)



IMAX CORPORATION                               ... APPELLANT

                       VERSUS

M/S E-CITY ENTERTAINMENT (I) Pvt. LTD.         ... RESPONDENT


                                      1


                                 2 JUDGMENT

S. A. BOBDE, J.


      Leave granted.


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  Hunter[1].  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  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  Sa[2],  Harmony
Innovation  Shipping  Ltd.  vs.  Gupta  Coal  India  Ltd.[3],  and  Reliance
Industries Ltd. vs. Union of India[4] 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  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
Company[5], 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  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.”

      This view has been followed  in  several  cases,  See  Venture  Global
Engg. vs. Satyam Computer Services Ltd.[7], Videocon Industries Limited  vs.
Union of India[8], 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 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:-

Parties agreed that the seat maybe outside India as  may  be  fixed  by  the
ICC; and



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

















-----------------------
[1]

       Redfern and Hunter on International Arbitration, Fifth Edition
[2]    (2015) 5 SCC 656
[3]    (2015) 9 SCC 172
[4]    (2014) 7 SCC 603
[5]    (1992) 3 SCC 551
[6]    (2002) 4 SCC 105
[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