Yograj Infrastructure Ltd. Vs Ssangyong Engineering and Construction Co. Ltd.

@JUDGMENTTAG-ORDER

Ajit Singh, J.@mdashThis appeal is directed against the order dated 12.2.2013 passed in M.J.C. No. 6/2011 by the First Additional District Judge, Narsinghpur, whereby he has rejected the appellant''s application for setting aside an interim award. The essential facts giving rise to this appeal are that the appellant is an infrastructure company registered under the Companies Act. The appellant is engaged in the business of construction, development and execution of projects like road, civil works etc. The respondent is also Foreign Company of Korea and it too is engaged in the construction of road etc.

2. On 12.4.2006, the National Highway Authority of India awarded a contract to the respondent for the rehabilitation and up-gradation to four-laning of the Jhansi-Lakhnadon section from kms. 297 to 351 on National Highway in the State of Madhya Pradesh. The total contract amount for the project was Rs. 2,19,01,16,805/-. On 13.8.2006 the respondent entered into a sub-contract with the appellant for carrying out the project. The agreement contained an arbitration Clause 27 for resolution of dispute arising out of the contract. Clause 28 of the agreement provided for governing law.

3. A dispute arose between the appellant and respondent with regard to the performance of the agreement. The respondent, therefore, on 22.9.2009 terminated the agreement dated 13.8.2006 on various grounds including delay in performing the work under the agreement. Aggrieved, the appellant filed an application before the District Judge, Narsinghpur u/s 9 of the Arbitration and Conciliation Act, 1996 (in short "the Act 1996") praying for interim reliefs. A similar application was also filed by the respondent for interim reliefs in the same Court. Finally on 20.5.2010 the dispute between the appellant and respondent was referred to arbitration in terms of the agreement and a sole arbitrator, Mr. G. R. Easton, was appointed by the Singapore International Arbitration Centre.

4. On 4.6.2010, the appellant filed an application u/s 17 of the Act 1996 before the arbitrator in Singapore praying to restrain encashment of Bank guarantees, direction for release of Rs. 1,44,42,25,884/- along with interest, restrain removal, shifting etc. of plant machinery. The respondents also filed an application on 5.6.2010 before the arbitrator seeking interim measures in furnishing of securities etc. The arbitrator by his order dated 29.6.2010 dismissed the appellant''s application but allowed the application of respondents in respect of certain interim reliefs. The appellant challenged the order dated 29.6.2010 before the District Judge, Narsinghpur, u/s 37(2)(b) of the Act 1996 for setting aside the same. The District Judge, however, dismissed the application vide order dated 23.7.2010 on the ground that it was not maintainable because the arbitration proceedings were being held in Singapore and the same were governed by the laws of Singapore. Aggrieved, the appellant challenged the order dated 23.7.2010 in Civil Revision No. 304/2010 before the High Court which was dismissed vide order dated 31.8.2010. Undeterred, the appellant filed Civil appeal No. 7562/2011 before the Supreme Court and it too was dismissed by judgment dated 1.9.2011 which is also reported in Supreme Court Cases Yograj Infrastructure Ltd. Vs. Ssang Yong Engineering and Construction Co. Ltd., The Supreme Court, while dismissing the appeal, has held that its earlier decision in Bhatia International Vs. Bulk Trading S.A. and Another, regarding applicability of the provisions of Part-I of the Act 1996 even when the seat of arbitration was not in India, was not applicable in the appellant''s case because it had specifically agreed for the arbitration proceedings being conducted in accordance with the Singapore International Arbitration Centre Rules (SIAC Rules) which includes Rule 32.

5. The arbitration proceedings between the appellant and respondent continued in Singapore and the arbitrator passed the interim award on 30.6.2011. Dissatisfied with the interim award, the appellant challenged its validity before the Additional District Judge, Narsinghpur, by filing an application u/s 34 of the Act 1996. The respondent objected to the maintainability of the application. The Additional District Judge agreed with the objection and by the impugned order dated 12.2.2013 has dismissed the application. The District Judge, while dismissing the application, has relied upon the above mentioned decision of the Supreme Court between appellant and respondent i.e. Yograj Infrastructure Ltd. Vs. Ssang Yong Engineering and Construction Co. Ltd., and also a five Judge Bench decision of the Supreme Court in Bharat Aluminium Company and Others Vs. Kaiser Aluminium Technical Service, Inc. and Others etc. etc., . It is in this background, the appellant has filed the present appeal.

6. The learned counsel for the appellant has mainly argued that the Additional District Judge committed an illegality in relying upon the decision of the Supreme Court in Bharat Aluminium Company (supra) because according to the judgment itself the same shall apply prospectively to all the arbitration agreements executed hereafter i.e. 6.9.2012 whereas the agreement in question was executed on 13.8.2006. It has also been argued that SIAC Rules were applicable only during the subsistence of arbitration proceedings and these rules ceased to apply after passing of the interim award. The learned counsel has further argued that the earlier decision of the Supreme Court between the appellant and respondent Yograj Infrastructure Limited (supra) related to issues raised during arbitration proceedings and, therefore, after passing of the partial award it was not applicable for holding that the Indian Courts shall have no jurisdiction for setting aside the award. In reply, the learned counsel for respondents has defended the order passed by the Additional District Judge.

7. The main question which calls for our consideration is whether the Additional District Judge, Narsinghpur, has the jurisdiction to set aside the interim award passed by the arbitrator in arbitration proceedings which were held in Singapore.

8. To answer the issue we deem it proper to first examine Clauses 27 and 28 of the agreement which provide for arbitration and governing law. The clauses read as under:

27. Arbitration

27.1 All disputes, differences arising out of or in connection with the agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules as in force at the time of signing of this agreement. The arbitration shall be final and binding.

27.2 The arbitration shall take place in Singapore and be conducted in English Language.

27.3. None of the party shall be entitled to suspend the performance of the Agreement merely by reason of dispute and/or dispute referred to Arbitration.

28. Governing law

This Agreement shall be subject to the laws of India. During the period of Arbitration, the performance of this Agreement shall be carried on without interruption and in accordance with its terms and provision.

A bare reading of the above quoted Clause 27.1 makes it clear that the arbitration proceedings were to be conducted in Singapore in accordance with the SIAC Rules which were in force at the time of signing of the agreement. Likewise, Clause 27.2 also makes it clear that the seat of arbitration shall be Singapore. There is, therefore, no doubt that the procedural law with regard to the arbitration proceedings is the SIAC Rules and the substantive law as per Clause 28 quoted above governing the agreement shall be the Law of India i.e. the Act 1996.

9. The SIAC Rules also includes Rule 32 and it reads as under:

32. Law of the Arbitration

Where the seat of arbitration is Singapore, the law of the arbitration under these Rules shall be the international Arbitration Act (Chapter 143A, 2002 Ed. Statutes of the Republic of Singapore) or its modification or re-enactment thereof.

The aforesaid rule, without any ambiguity, states that where the seat of arbitration is Singapore, the law of the arbitration under SIAC Rules shall be the International Arbitration Act (Chapter 143A, 2002 Ed. Statutes of the Republic of Singapore).

10. The International Arbitration Act (Chapter 143A) (in short, "the IA Act") has been enacted to make provision for the conduct of international commercial arbitration based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) and conciliation proceedings and to give effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and for matters connected therewith. This Act has the force of law in Singapore. According to its section 2(1) "award" means a decision of the arbitral tribunal on the substance of the dispute and includes any interim or partial award. The same section also states that "Model Law" means the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21st June 1985, the text in English of which is set out in the First Schedule.

11. Article 34 of the First Schedule to the IA Act provides for an exclusive recourse against arbitral award which is making of an application for its setting aside before a specified Court. It reads as under:

ARTICLE 34.- APPLICATION FOR SETTING ASIDE AS EXCLUSIVE RECOURSE AGAINST ARBITRAL AWARD

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this Article.

(2) An arbitral award may be set aside by the court specified in Article 6 only if:

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

(i) a party to the arbitration agreement referred to in Article 7 was 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 this State; or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

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

(b) the court finds that:

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.

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

(4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal''s opinion will eliminate the grounds for setting aside.

According to this Article, recourse to a court against the arbitral award can be made only by making an application for setting aside in accordance with its paragraphs (2) and (3) and as per para (2) an arbitral award can be set aside by the court specified in Article 6 only on conditions enumerated therein.

12. Thus, the award, which includes an interim award, passed under SIAC Rules can be set aside only by a court specified in Article 6 of the First Schedule which is as follows:

Article 6.- COURT OR OTHER AUTHORITY FOR CERTAIN FUNCTIONS OF ARBITRATION ASSISTANCE AND SUPERVISION.

The functions referred to in Articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by........(Each State enacting this Model Law specifies the court, courts or, where referred to therein, other authority competent to perform these functions).

13. Admittedly, the Indian Parliament has not enacted Model Law and at the time of enactment of the Act 1996 it had only taken into account the UNCITRAL Model Law. Therefore, the courts in India have no jurisdiction to set aside an award passed by the arbitrator under SIAC Rules. The appellant can challenge the validity of an interim award only by making an application under Article 34 before the courts in Singapore specified in Article 6 of First Schedule to the IA Act. This we also say because there cannot be any partial selection of forum. Once the appellant surrendered to SIAC Rules for arbitration proceedings, all the issues including challenge to the validity of award will have to be taken before that court to whose jurisdiction the appellant surrendered.

14. In Bhatia International (supra) a three-Judge Bench of the Supreme Court had decided that in cases of international commercial arbitration held even out of India, provisions of Part I of the Act 1996 would apply unless the parties by agreement, express or implied, exclude all or any of its provisions and in such a situation the laws or rules chosen by the parties would apply and any provision of Part I, contrary to or excluded by that law or rules, will not apply. This decision was also followed by a two-Judge Bench of the Supreme Court in Venture Global Engineering Vs. Satyam Computer Services Ltd. and Another, . Both these decisions were then later considered by a five-Judge Bench of the Supreme Court in Bharat Aluminium Company (supra). In that case, the Supreme Court, after extensively examining the provisions of the Act 1996 disagreed with the conclusions recorded in Bhatia International and Venture Global Engineering (supra) and held that Part I of the Act 1996 is applicable only to al the arbitrations which take place within the territory of India. However, the Supreme Court in the concluding paragraph has also observed that since the judgment in Bhatia International was rendered on 13.3.2002 and it was followed by all the High Courts as well as by the Supreme Court on numerous occasions, including in Venture Global Engineering which was rendered on 10.1.2008, in order to do complete justice the law now declared by it shall apply prospectively to all the arbitration agreements executed hereafter i.e. 6.9.2012. In our considered view, the law declared in Bharat Aluminium Company does not upset earlier final decision taken by the Indian courts following the decision in Bhatia International. It is only in this context the law declared by the judgment in Bharat Aluminium Company is prospective.

15. In the instant case, the Supreme Court in Yograj Infrastructure Limited (supra) has already held that having regard to the nature of agreement between the appellant and respondent the case of Bhatia International was not applicable because the appellant had specifically agreed for the arbitration proceedings being conducted in accordance with SIAC Rules which includes Rule 32. Though in Yograj Infrastructure Limited the issue related to filing an appeal u/s 37(2)(b) of the Act 1996 for setting aside of the order dated 29.6.2010 passed by the arbitrator in respect of certain interim reliefs, the ultimate conclusion was that the decision of Bhatia International did not apply. The decision being inter-parties still stands and cannot be said to have been affected by the observation of the Supreme Court in Bharat Aluminium Company that the law declared by it now shall apply prospectively. For these reasons, we are unable to agree with the submissions made by the learned counsel for appellant. The appeal has no merit. It fails and is dismissed.