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Monday, March 31, 2014

Arbitration and conciliation Act Sec.34 - part 1 of Arbitration Act not applies to international Commercial Arbitration held outside India - Arbitration: All disputes arising out of or in conjunction with this Contract shall be referred to the Refined Sugar Association, London for settlement in accordance with the Rules relating to Arbitration. This Contract shall be governed by and construed in accordance with English Law.’ - High court allowed the objection - Apex court confirmed the same = Sakuma Exports Ltd. …..Petitioner Versus Louis Dreyfus Commodities Suisse S.A. …..Respondent= 2014 (March. Part ) judis.nic.in/supremecourt/filename=41361

 Arbitration and conciliation Act Sec.34 -  part 1 of Arbitration Act not applies to international Commercial  Arbitration  held  outside India - Arbitration: All disputes arising out of or  in  conjunction  with this Contract shall be referred to the Refined  Sugar  Association, London for settlement in accordance  with  the  Rules  relating  to Arbitration.  This Contract shall be governed by and  construed  in accordance with English Law.’ - High court allowed the objection - Apex court confirmed the same = 

The Appellant is an Indian Company which carries on  the  business
      of import and export of sugar among other commodities.  The Respondent
      is a Swiss Company with whom the Appellant entered into  an  agreement
      on 12th January 2010 for  the purchase of  2700  metric  tons  of  Brazilian  white  sugar  of  a  stipulated description. 
Disputes arose between  the  parties.   
The  agreement
      between the parties contained  inter  alia  the  following  terms  and
      conditions:
 ‘Terms and conditions:
   This Contract  is  subject  to  the  Rules  of  the  Refined  Sugar
        Association, London as fully as if  the  same  had  been  expressly
        inserted herein, whether or not either or both parties  to  it  are
        Members of the Association.
  If any provision of this Contract is inconsistent with  the  Rules,
        such provision shall prevail.’
Parties envisaged that all disputes would be submitted to arbitration.
       The arbitration agreement was thus:
  ‘Arbitration: All disputes arising out of or  in  conjunction  with
        this Contract shall be referred to the Refined  Sugar  Association,
        London for settlement in accordance  with  the  Rules  relating  to
        Arbitration.  This Contract shall be governed by and  construed  in
        accordance with English Law.’
A final award was passed by the arbitral tribunal on 31 December, 2010
      which was sought to be challenged  by  the  Appellant  in  proceedings
      under Section 34 of the Act of 1996 before the learned Single Judge of
      this Court.  
An objection was taken to the jurisdiction of this  Court
      to entertain the petition on the ground that the applicability of Part-
      I of the Act was excluded by the agreement  between  the  parties  and
      consequently even under  the  law  as  it  then  prevailed  in  Bhatia
      International, a Petition under Section 34 was not maintainable.   
The
      learned Single Judge has upheld the objection  and  has  come  to  the
      conclusion  that  this  Court  has  no  jurisdiction  to  entertain  a
      challenge to the award under Section 34.  The judgment  is  called  in
      question in appeal. =

There is no dispute between the parties that  
the  Constitution  Bench
      judgment of this Court in the case of Bharat  Aluminium  Company  etc.
      vs. Kaiser Aluminium Technical Services Inc. etc. (BALCO)[1] overruled
      
the earlier judgment in Bhatia International Vs. Bulk Trading S.A. and
      Anr.[2] 
in coming to the conclusion that Part I of the Act would  have
      no application to international Commercial  Arbitration  held  outside
      India, but on account of further direction that the  law  so  declared
      shall apply only prospectively to all arbitration agreements  executed
      thereafter, the arbitration agreement in the present  case  is  to  be
      governed by the law  decided  in  the  case  of  Bhatia  International
      (supra).   
According  to  the  judgment  in   the   case   of   Bhatia
      International (supra) the provisions of Part I of the Act would  apply
      to International Commercial Arbitration held out of India  unless  the
      parties by agreement, express or implied, exclude all or  any  of  its
      provisions.
Conclusion
We find no merit in the petition and the same is dismissed as such. No
      costs.
2014 (March. Part ) judis.nic.in/supremecourt/filename=41361
ANIL R. DAVE, SHIVA KIRTI SINGH
                                                              NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

        Petition for Special Leave to Appeal (Civil) No.27404 of 2013


Sakuma Exports Ltd.                                      …..Petitioner

      Versus

Louis Dreyfus Commodities Suisse S.A.              …..Respondent





                               J U D G M E N T



SHIVA KIRTI SINGH, J.

   1. After hearing the  parties  at  length  and  upon  going  through  the
      impugned judgment and order dated 6.8.2013 passed by Division Bench of
      High Court of Judicature at Bombay in Appeal No. 337  of  2013,  filed
      under Section  37  of  the  Arbitration  and  Conciliation  Act,  1996
      (hereinafter referred to as the ‘Act’),   we  are  of  the  considered
      view that the impugned order is  based  upon  proper  appreciation  of
      relevant facts and follows the law laid down by this  Court  correctly
      in arriving at the finding that in the facts of the case the courts in
      India have no jurisdiction to entertain the petition under Section  34
      of the Act, challenging  the  international  commercial  award  of  an
      arbitral  tribunal  constituted  by  the  Refined  Sugar  Association,
      London.

         S.L.P.(C)No.27404 of 2013 …. (contd.)
   2. There is no dispute between the parties that  the  Constitution  Bench
      judgment of this Court in the case of Bharat  Aluminium  Company  etc.
      vs. Kaiser Aluminium Technical Services Inc. etc. (BALCO)[1] overruled
      the earlier judgment in Bhatia International Vs. Bulk Trading S.A. and
      Anr.[2] in coming to the conclusion that Part I of the Act would  have
      no application to international Commercial  Arbitration  held  outside
      India, but on account of further direction that the  law  so  declared
      shall apply only prospectively to all arbitration agreements  executed
      thereafter, the arbitration agreement in the present  case  is  to  be
      governed by the law  decided  in  the  case  of  Bhatia  International
      (supra).   According  to  the  judgment  in   the   case   of   Bhatia
      International (supra) the provisions of Part I of the Act would  apply
      to International Commercial Arbitration held out of India  unless  the
      parties by agreement, express or implied, exclude all or  any  of  its
      provisions.
   3. Since we are in agreement with the views  of  learned  High  Court  of
      Bombay, it is not necessary to  go  to  the  factual  details  but  on
      account of lengthy submissions advanced on behalf of  the  petitioner,
      we feel it proper to extract paragraph  3  of  the  impugned  judgment
      which reflects not only the relevant facts but also the relevant terms
      and conditions of the agreement between the parties.  It reads thus:
      “3. The Appellant is an Indian Company which carries on  the  business
      of import and export of sugar among other commodities.  The Respondent
      is a Swiss Company with whom the Appellant entered into  an  agreement
      on 12th January 2010 for  the purchase


      S.L.P.(C)No.27404 of 2013 …. (contd.)


      of  2700  metric  tons  of  Brazilian  white  sugar  of  a  stipulated
      description.  The  sugar was to be shipped between 15 January 2010 and
      15 February 2010 at the option of the  seller,  the  Respondent.   The
      port of  destination was to be Nhava Sheva or Kolkata at the option of
      the Appellant.  Disputes arose between  the  parties.   The  agreement
      between the parties contained  inter  alia  the  following  terms  and
      conditions:


      ‘Terms and conditions:


        This Contract  is  subject  to  the  Rules  of  the  Refined  Sugar
        Association, London as fully as if  the  same  had  been  expressly
        inserted herein, whether or not either or both parties  to  it  are
        Members of the Association.


        If any provision of this Contract is inconsistent with  the  Rules,
        such provision shall prevail.’


      Parties envisaged that all disputes would be submitted to arbitration.
       The arbitration agreement was thus:


        ‘Arbitration: All disputes arising out of or  in  conjunction  with
        this Contract shall be referred to the Refined  Sugar  Association,
        London for settlement in accordance  with  the  Rules  relating  to
        Arbitration.  This Contract shall be governed by and  construed  in
        accordance with English Law.’


      A final award was passed by the arbitral tribunal on 31 December, 2010
      which was sought to be challenged  by  the  Appellant  in  proceedings
      under Section 34 of the Act of 1996 before the learned Single Judge of
      this Court.  An objection was taken to the jurisdiction of this  Court
      to entertain the petition on the ground that the applicability of Part-
      I of the Act was excluded by the agreement  between  the  parties  and
      consequently even under  the  law  as  it  then  prevailed  in  Bhatia
      International, a Petition under Section 34 was not maintainable.   The
      learned Single Judge has upheld the objection  and  has  come  to  the
      conclusion  that  this  Court  has  no  jurisdiction  to  entertain  a
      challenge to the award under Section 34.  The judgment  is  called  in
      question in appeal.”








        S.L.P.(C)No.27404 of 2013 …. (contd.)
   4. After discussing appropriate case laws, the High Court summarized  the
      relevant facts and its views in paragraph 20 which  also  conveniently
      extracts Rule 8 of the Rules of  Refined  Sugar  Association,  London.
      Paragraph 20 reads as follows:
      “20. In the present case, the parties  have  specifically  made  their
      contract subject to  the  rules  of  the  Refined  Sugar  Association,
      London.  Leaving no ambiguity of interpretation the contract  mandates
      that  the  rules  of  the  Refined  Sugar  Association,   London   are
      incorporated ‘as fully as if the same has been expressly inserted’  in
      the contract.  The governing law of the contract is English law.   All
      disputes arising out or in conjunction with the contract  were  to  be
      referred to the Refined Sugar Association for settlement in accordance
      with the rules relating to arbitration of the Association.  The law in
      the U.K. is, therefore, the substantive law of the contract.  The seat
      of the arbitration is in the U.K. Parties have made it clear that  the
      rules of the Refined Sugar Association would govern the resolution  of
      their disputes.  Rule 8 of the Rules of the Refined Sugar  Association
      (on which there is no dispute between the parties during the course of
      the hearing of the appeal) provides as follows:


        ‘8.  For  the  purpose  of  all  proceedings  in  arbitration,  the
        contract shall  be  deemed  to  have  been  made  in  England,  any
        correspondence in reference to the offer, the acceptance, the place
        of payment or otherwise, not-withstanding,  and  England  shall  be
        regarded as the place of performance.  Disputes  shall  be  settled
        according to the law of England wherever the domicile, residence or
        place of business of the parties to the contract may be or  become.
        The seat of the Arbitration shall be England  and  all  proceedings
        shall take place in England.  It shall not  be  necessary  for  the
        award to state expressly the seat of the arbitration.’


      The terms of the purchase contract as well as Rule 8 of the  Rules  of
      the Refined Sugar Association would make it clear that disputes  shall
      be settled  in  accordance  with  the  law  of  England  wherever  the
      domicile, residence or place of business of parties  to  the  contract
      may be or become.  Moreover, for the purposes of  all  proceedings  in
      arbitration, the contract shall be deemed to have been made in England
      and England shall be regarded as the place






               S.L.P.(C)No.27404 of 2013 …. (contd.)

      of performance.  The seat of the arbitration shall be England and  all
      proceedings shall take place  in  England.   On  the  basis  of  these
      provisions, it has been submitted that parties have, by the  terms  of
      their agreement, impliedly excluded the provisions of Part-I.  We find
      merit in the submission. It is clear from  the  terms  and  conditions
      which have been accepted by the parties in the purchase contract, read
      with Rule 8 that parties have accepted English law  as  the  governing
      law of the contract; that the seat of the arbitration would be London;
      that disputes shall be settled according to the law of  England  which
      would include the resolution of  disputes  and  that  all  proceedings
      shall take place in England.  Alternatively, even if  it  were  to  be
      held that parties have not provided for the curial law  governing  the
      arbitration, the decision in Bhatia International  does  not  prohibit
      the exclusion  of the application of Part-I on account of  the  proper
      law of the contract  being  a  foreign  law.   Where  the  proper  law
      governing the contract is expressly chosen by the parties, which  they
      have done in the present case by selecting English law as  the  proper
      law of the contract, that law must, in the absence of an  unmistakable
      intention to the contrary,  govern  the  arbitration  agreement.   The
      arbitration agreement, though it is collateral  or  ancillary  to  the
      main  contract  is  nevertheless  a  part  of  the  contract.   In  an
      application for challenging the validity of an  arbitral  award  under
      Section 34, the Court would necessarily have  to  revert  to  the  law
      governing the arbitration agreement which,  in  our  considered  view,
      would be the law of England.”


   5. Since one of the terms and  conditions  of  the  agreement  makes  the
      contract subject to the Rules of the Refined Sugar Association, London
      by treating the same to have been expressly inserted in the agreement,
      Rule 8 of the Refined Sugar Association, London leaves  no  manner  of
      doubt that the parties have not only accepted English law as  the  law
      governing the contract but the disputes and the arbitration shall also
      be governed by  the  law  of  England.  The  seat  of  Arbitration  is
      admittedly England.
   6. Learned counsel for the petitioner highlighted  that  the  arbitration
      clause is  not strictly  the  same  as  recommended  by   the  Refined
      Sugar Association,

    S.L.P.(C)No.27404 of 2013 …. (contd.)
London which clearly stipulated that the arbitration shall be  conducted  in
accordance with the English law.  But  this  does  not  take  us  far.   The
condition that the contract is subject to the Rules  of  the  Refined  Sugar
Association, London which stand inserted in the  contract  and  wordings  of
Rule 8 clinch the relevant issue in favour of the respondent.
   7. We find no merit in the petition and the same is dismissed as such. No
      costs.


                                       …………………………….J.
                                       [ANIL R. DAVE]






                                       ……………………………..J.
                                       [SHIVA KIRTI SINGH]

New Delhi.
March 28, 2014.

                           -----------------------
        [1]        2012 (9) SCC 552
        [2]        2002 (4) SCC 105

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