BHARTI TELEVENTURES LTD Vs. DSS ENTERPRISES PRIVATE LTD

JUDGEMENT

(1.) Should the Court e arbitration agreement exists between the parties has yet again arisen like the mythical phoenix from the ashes of litigation. Mr. Rajiv Sawhney, learned Senior counsel for the contesting Defendant has contended that the Court must forthwith refer the parties to arbitration, leaving it to the Arbitral Tribunal to decide upon its own jurisdiction viz. whether the parties before it had agreed to resolve their disputes through arbitration and/or whether the original compact to this effect does not subsist as it had been abandoned and given up or should be deemed to have been given up. In this case I have not been presented with a clean slate on which to write the judgment inasmuch as the controversy between the parties has received jural attention already. Benefitting from the detailed and erudite legal submissions made before me, it is my understanding that if possible or plausible cases are presented on behalf of both the adversaries, then the Court should direct them to ventilate their respective cases before the arbitrators. However, if upon even a cursory consideration of the facts there is a strong preponderant possibility that one of the parties will needlessly and vexatiously be subjected to arbitration, thereby compelling it to expend avoidable time, effort and expense, the Arbitration & Conciliation Act, 1996 (hereinafter referred to as `Arb. & Con. Act') expects the Court to look into the matter, and thereby obviate a futile and facile Reference. This opinion holds irrespective of whether it is in the context of a domestic or a foreign arbitration; in fact this determination is essential in the latter case.

(2.) Mr. Rajiv Sawhney has relied very heavily on the decision of the Hon'ble Supreme Court titled Bhatia International vs. Bulk Trading S.A. and Another, (2002) 4 SCC 105 for the proposition that in all instances where parties contract with each other that Indian laws would apply to the arbitration, the Award rendered thereon would invariably be pursuant to a domestic and not a foreign arbitration; accordingly, Part I and not Part II would govern any disputes that may be brought before the Court or Arbitral Tribunal. It is through this dialectic that he has argued that Section 45 of the Arb. & Con. Act could not be resorted to; that instead Section 8 of the Arb. & Con Act mandates the Court to refer the parties to arbitration, leaving it to the Arbitral Tribunal under Section 16 to settle objections even to their own jurisdiction, both of which fall in Part I of the Arb. & Con. Act. Mr.Sawhney has contended that it is the applicable law and not the venue of the arbitration which is the determinative factor in resolving this legal nodus. It is apparent from a perusal of this celebrated decision that the argument that every statute should be interpreted in a manner which would not lead to its extraterritoriality was not raised at all. Therefore, for the Arb. & Con. Act to apply it is imperative to find some connectivity with India. (see C.E.B. Draper & Sons Ltd. v. Edward Turner & Son, Ltd., [1964] 3 All E.R. 148.).

(3.) The opinion of the Apex Court in Bhatia International case (supra) can be gleaned from the following passages-- 16. A reading of the provisions show that the said Act applies to arbitrations which are held in India between Indian nationals and to international commercial arbitrations whether held in India or out of India. Section 2(1)(f) defines an international commercial arbitration. The definition makes no distinction between international commercial arbitrations held in India or outside India. An international commercial arbitration may be held in a country which is a signatory to either the New York Convention or the Geneva Convention (hereinafter called the convention country ). An international commercial arbitration may be held in a non- convention country. The said Act nowhere provides that its provisions are not to apply to international commercial arbitrations which take place in a non- convention country. Admittedly, Part II only applies to arbitrations which take place in a convention country. Mr. Sen fairly admitted that Part II would not apply to an international commercial arbitration which takes place in a non-convention country. He also fairly admitted that there would be countries which are not signatories either to the New York Convention or to the Geneva Convention. It is not possible to accept the submission that the said Act makes no provisions for international commercial arbitrations which take place in a non-convention country. ... 23. That the legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section(7) of Section 2 reads as follows: 2. (7) An arbitral award made under this Part shall be considered as a domestic award. As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians, and (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India, an international commercial arbitration may be held in a convention country or in a non-convention country. The said Act however only classifies awards as domestic awards or foreign awards . Mr. Sen admits that provisions of Part II make it clear that foreign awards are only those where the arbitration takes place in a convention country. Awards in arbitration proceedings which take place in a non-convention country are not considered to be foreign awards under the said Act. They would thus not be covered by Part II. An award passed in an arbitration which takes place in India would be a domestic award . There would thus be no need to define an award as a domestic award unless the intention was to cover awards which would otherwise not be covered by this definition. Strictly speaking, an award passed in an arbitration which takes place in a non- convention country would not be a domestic award . Thus the necessity is to define a domestic award as including all awards made under Part I. The definition indicates that an award made in an international commercial arbitration held in a non-convention country is also considered to be a domestic award . ..... 25. The beginning part of Section 28 reads as follows: Rules applicable to substance of dispute.-- (1) Where the place of arbitration is situate in India,-- * * * Section 28 is in Part I. If Part I was not to apply to an arbitration which takes place outside India there would be no necessity to specify that the rules are to apply where the place of arbitration is situate in India . It has been held in the case of National Thermal Power Corpn. v. Singer Co. that in international commercial arbitration parties are at liberty to choose, expressly or by necessary implication, the law and the procedure to be made applicable. The procedure or the rules governing such arbitration may be of the country where the arbitration is being held or the body under whose aegis the arbitration is being held -- all bodies which conduct arbitrations and all countries which have rules and laws governing arbitrations. Thus Section 28 does not provide for rules where the place of arbitration is out of India. 26. Mr. Sen had also submitted that Part II, which deals with enforcement of foreign awards does not contain any provision similar to Section 9 or Section 17. As indicated earlier, Mr. Sen had submitted that this indicated the intention of the legislature not to apply Sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate Chapter or Part. Part II deals with enforcement of foreign awards. Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of foreign awards which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded the provisions of Part I will also apply to foreign awards . The opening words of Sections 45 and 54, which are in Part II, read notwithstanding anything contained in Part I . Such a non obstante clause had to be put in because the provisions of Part I apply to Part II. .... 29. We see no substance in the submission that there would be unnecessary interference by courts in arbitral proceedings. Section 5 provides that no judicial authority shall intervene except where so provided. Section 9 does not permit any or all applications. It only permits applications for interim measures mentioned in clauses (i) and (ii) thereof. Thus there cannot be applications under Section 9 for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the Arbitral Tribunal. All such challenges would have to be made before the Arbitral Tribunal under the said Act. .... 32. To conclude, we hold that the 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. 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. ..... 34. Thus Article 23 of the ICC Rules permits parties to apply to a competent judicial authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the said Act. 35. 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 interpreting it in the manner indicated above. However, in our view a proper and conjoint reading of all the 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 are 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. (emphasis has been added) THE STARE DECISIS OF BHATIA INTERNATIONL