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Friday, September 2, 2011

arbitration - With regard to the effect of Section 42 of the Arbitration and Conciliation Act, 1996, 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 became 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. 41 40. We are not, therefore, inclined to interfere with the judgment under appeal and the appeal is accordingly dismissed and all interim orders are vacated.


                                         REPORTABLE










              IN THE SUPREME COURT OF INDIA






                  CIVIL APPELLATE JURISDICTION






             CIVIL APPEAL NO.7562    OF 2011


       (Arising out of SLP(C) No.25624 of 2010)










YOGRAJ INFRASTRUCTURE LTD.                ...     APPELLANT  










           Vs.










SSANG YONG ENGINEERING AND 


CONSTRUCTION CO. LTD.                     ...     RESPONDENT










                      J U D G M E N T










ALTAMAS KABIR, J.








1.    Leave granted.










2.    The   Appellant   is   a   company   incorporated   under 






the  Companies  Act,  1956,  while  the  Respondent  is  a 



                                2










company incorporated under the laws of the Republic 






of   Korea   with   its   registered   office   at   Seoul   in 






Korea and its project office at New Delhi.










3.    On   12th     April,   2006,   the   National   Highways 






Authority   of   India,   New   Delhi   (NHAI)   awarded   a 






contract   to   the   Respondent,   SSang   Yong   Engineering 






and   Construction   Co.   Ltd.,   hereinafter   referred   to 






as   "SSY",   for   the   National   Highways,   Sector   II 






Project,   Package:   ABD-II/C-8,   for   upgradation   to 






Four   Laning   of   Jhansi-Lakhnadon   Section,   KM   297   to 






KM   351   of   NH   26   in   the   State   of   Madhya   Pradesh. 






The   total   contract   amount   was       2,19,01,16,805/-. 






On   13th     August,   2006,   SSY   entered   into   a   Sub-






Contract   with   the   Appellant   Company   for   carrying 






out   the   work   in   question.     The   Work   Order   of   the 






entire  project  was  granted  to  the  Appellant  by  the 






Respondent on back-to-back basis.  Clause 13 of the 






Agreement   entered   into   between   the   Respondent   and 






the Appellant provided that 92% of all payments for 



                               3










the work done received by the Respondent from NHAI, 






would   be   passed   on   to   the   Appellant.     Clauses   27 






and   28   provided   for   arbitration   and   the   governing 






law   agreed   to   was   the   Arbitration   and   Conciliation 






Act,   1996.     On   31st  October,   2006,   the   Appellant 






furnished   a   Performance   Bank   Guarantee   for            






6,05,00,000/-   to   the   Respondent   and   it   also 






invested about      88.15 crores in the project.  Three 






more   Bank   Guarantees,   totaling      5,00,00,000/-,   for 






release of mobilization advance were also furnished 






by   the   Appellant   on   29th     May,   2009.        On   22nd 






September,   2009,   the   Respondent   Company   issued   a 






notice of termination of the Agreement, inter alia, 






on the ground of delay in performing the work under 






the Agreement.










4.    On account of the above, the Appellant filed an 






application before the District and Sessions Judge, 






Narsinghpur, Madhya Pradesh, under Section 9 of the 






Arbitration and Conciliation Act, 1996, praying for 



                                               4










interim   reliefs.                   A   similar   application   under 






Section   9   of   the   above   Act   was   filed   by   the 






Appellant   before   the   same   Court   on   30th  December, 






2009, also for interim reliefs.  Ultimately, on 20th 






May,   2010,   the   dispute   between   the   parties   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   on   20th  May,   2010.     On   4th  June, 






2010, the Appellant filed an application before the 






Sole   Arbitrator   under   Section   17   of   the   aforesaid 






Act   being   SIAC   Arbitration   No.37   of   2010,  inter  






alia, for the following reliefs :










     "a.    restrain               the         SSY          from         encashing 


            Performance                             Bank                 Guarantee 


            No.101BGPGO63040001   dated   31.10.06   of 


            Syndicate   Bank,   Nehru   Place,   Delhi   of 


             6.05 crores;






     b.     restrain the SSY from enchashing three 


            Bank   Guarantees   furnished   towards   the 


            mobilization   advance   bearing   numbers 


            101   BGFG   091490001   of                       1   Crore,   101 


            BGFG   091490002   of                      1   Crore   and   101 



                                  5










            BGFG   091490003   of       3   Crores,   totaling 


            to     5 Crores;






      c.    direct   SSY   to   release   a   sum   of                      


            144,42,25,884/-            along               with            the 


            interest   @   36%   till   realization   of 


            nationalized   bank   of   India   for   the 


            aforesaid   amount   and   keep   it   alive 


            till passing of the final Award.






      d.    restrain   SSY   from   removing,   shifting, 


            alienating   or   transferring   in   any 


            manner either itself or through any of 


            its         agents/employees,                 the         plant, 


            machineries,   equipments,   vehicles   and 


            materials,   in   other   words   maintain 


            status-quo,   till   the   passing   of   the 


            final arbitral award;






      e.    grant   any   other   appropriate   interim 


            measures   of   protection   in   favour   of 


            the   Cross-Claimant/applicant,   which   in 


            the   esteemed   opinion   of   this   Hon'ble 


            Tribunal   are   just   and   proper   in   the 


            facts and circumstance of the case;"










5.    The   Respondent   also   filed   an   application   under 






Section   17   of   the   above   Act   before   the   Sole 






Arbitrator   on   5th  June,   2010,   for   interim   reliefs. 






After   considering   both   the   applications,   the 






Arbitrator   passed   an   interim   order   on   29th  June, 






2010, in the following manner :



                                         6










"1.         The   respondent   is   to   immediately 


release,   for   use   by   the   Claimant,   the 


items   of   plant,   machinery   and   equipment 


(PME)   numbered   1,5,7,8,10,19,20,21,22,23 


and 32, as listed in Annexure A (Machinery 


Details)   of   the   Claimant's   Application 


dated 5 June 2010.






2.          The   respondent   is   restrained   from 


creating   any   third   party   interest   in,   or 


otherwise   selling,   leasing   or   charging, 


the   PME   or   other   assets   presently   located 


at   the   work   site   and/or   the   camp   site   and 


which are owned by the respondent, without 


the permission of this Tribunal.






3(i).           The   claimant   is   permitted   to   use 


the  aggregates, which  have been  identified 


in   Annexure   D   (engineer's   Statement   of 


Materials   at   Site   for   September   2009)   of 


the   Claimant's   Application   dated   5   June 


2010   as   a   total   quantity   of   274,580   cubic 


metres,   for   the   carrying   out   of   the   works 


in          accordance            with                   the            terms         and 


conditions   of   the   Main   Agreement   and   the 


Agreement   dated   13   August,   2006   between 


the parties.






3(ii)           The   respondent   is   to   give   the 


Claimant              access                  to              the            aggregate 


stockpiles                 where              the                  abovementioned 


quantity of material is currently held.






The above interim orders are made with the 


objective   of   enabling   the   construction 


work   on   the   project   to   continue   while   the 


disputes   between   the   parties   are   resolved 


in   these   arbitration   proceedings   (ref. 


Terms or Reference dated 23 June 2010).



                                          7










        The   parties   have   liberty   at   short   notice, 


        if   any   of   the   above   directions   require 


        clarification   or   amendment   in   order   to 


        ensure proper implementation.






        The   respondent   has   leave   (until   6   July 


        2010)   to   make   a   further   application   for 


        the   provision   of   security   by   the   claimant 


        in relation to the PME and aggregates."   


     






6.      Aggrieved by the aforesaid interim order passed 






by   the   learned   Arbitrator,   the   Appellant   herein, 






which   was   the   respondent   before   the   learned 






Arbitrator,   filed   Appeal   No.2   of   2010   on   2nd  July, 






2010          before         the         learned          District             Judge, 






Narsinghpur,            under            Section         37(2)(b)         of         the 






Arbitration and Conciliation Act, 1996, for setting 






aside the same.  On behalf of the respondent it was 






contended in the said appeal that the same was not 






maintainable   before   the   learned   District   Judge, 






Narsinghpur,   since   the   seat   of   the   arbitration 






proceedings   was   in   Singapore   and   the   said 






proceedings were governed by the laws of Singapore. 






Accepting the submissions advanced on behalf of the 



                                8










respondent,   the   learned   District   Judge   dismissed 






the   appeal   as   not   maintainable   on   23rd  July,   2010, 






without deciding the matter on merits.










7.    The   appellant   then   moved   Civil   Revision   No.304 






of   2010,   before   the   High   Court   on   26th  July,   2010. 






The   same   was   dismissed   by   the   High   Court   on   31st 






August,   2010,   against   which   the   Special   Leave 






Petition (now appeal) has been filed.










8.    Appearing   for   the   Company,   Ms.   Indu   Malhotra, 






learned   Senior   Advocate,   submitted   that   the   stand 






taken on behalf of the respondent that the PMEs had 






to   remain   on   site   even   in   case   of   termination   of 






the   Agreement,   was   without   any   basis,   since   after 






the   Agreement   dated   13th  August,   2006,   the   parties 






had   agreed   in   the   Meeting   held   on   23rd  September, 






2006   that   in   case   of   termination   of   the   Agreement 






between   the   parties,   the   respondent   would   transfer 






the   PMEs   to   the   appellant.     Ms.   Malhotra   further 






clarified   that   Clause   4   of   the   Agreement   related 



                                9










only   to   the   PMEs   and   not   to   the   aggregates,   since 






it had been admitted by the respondent that in case 






the   aggregates   were   not   made   available   to   them, 






they   could   buy   the   same   from   the   open   market.     It 






was   further   clarified   that   there   were   only   two 






machines   out   of   35   machines   which   formed   the 






subject   matter   of   the   interim   application,   i.e., 






Hotmix   Plant   and   Crusher,   which   were   in   the 






possession   of   the   appellant   and   the   value   thereof 






would be approximately         7 crores and a sum of          7.20 






crores   had   already   been   deducted   by   the   respondent 






towards the repayment of the Arab Bank Loan for the 






said   PMEs.     Ms.   Malhotra   submitted   that   it   was 






incorrect   to   say   that   the   Project   was   stopped 






because   of   the   Stay   Order   passed   by   this   Court   as 






the   respondent   had   further   subcontracted   the   work 






to   Khara   and   Tarakunde   Infrastructure   Pvt.   Ltd., 






Ramdin   Ultratech   Pvt.   Ltd.   and   others.               Ms. 






Malhotra contended that apart from the Hotmix Plant 






and Crusher all the remaining PMEs had been removed 



                                                 10










by   the   respondent   after   the   passing   of   the   order 






29th June, 2010.










9.    On   the   question   of   the   applicable   law   in 






respect   of   the   arbitral   proceedings,   Ms.   Malhotra 






contended   that   the   Arbitration   and   Conciliation 






Act,   1996,   enacted   in   India   is   the   applicable   law 






of   arbitration.     Ms.   Malhotra   submitted   that   in 






terms   of   the   Agreement   arrived   at   between   the 






parties,   it   is   only   the   Indian   laws   to   which   the 






Agreement would be subjected.  She pointed out that 






Clause   28   of   the   Agreement   provides   that   the 






Agreement would be subject to the laws of India and 






that   during   the   period   of   arbitration,   the 






performance   of   the   Agreement   would   be   carried   out 






without   interruption   and   in   accordance   with   its 






terms         and         provisions.                            Accordingly,          having 






explicitly   agreed   that   the   Agreement   would   be 






subject   to   the   laws   of   India,   from   the   very 






commencement                   of         the              arbitration         till         its 



                                    11










conclusion,   the   law   applicable   to   the   arbitration 






would   be   the   Indian   law.     In   other   words,   all 






interim   measures   sought   to   be   enforced   would 






necessarily   have   to   be   in   accordance   with   Sections 






9 and 37(2)(b) of the 1996 Act.  










10.    Ms.   Malhotra   submitted   that   Clause   27.1,   which 






forms part of Clause 27 of the agreement, which is 






the         arbitration         clause,         provides         that         the 






proceedings   of   arbitration   shall   be   conducted   in 






accordance   with   the   SIAC   Rules.     In   other   words, 






the   provisions   of   SIAC   Rules   would   apply   only   to 






the   arbitration   proceedings,   but   not   to   appeals 






from such proceedings.  Ms. Malhotra submitted that 






the   right   to   appeal   from   an   interim   order   under 






Section   37(2)(b)   is   a   substantive   right   provided 






under the 1996 Act and was not governed by the SIAC 






Rules.  










11.    Ms.   Malhotra   also   urged   that   Rule   1.1   of   the 






SIAC   Rules,   which,  inter   alia,   provides   that   where 



                                12










the   parties   agreed   to   refer   their   disputes   to   the 






SIAC   for   arbitration,   it   would   be   deemed   that   the 






parties   had   agreed   that   such   arbitration   would   be 






conducted   in   accordance   with   the   SIAC   Rules.     If, 






however, any of the SIAC Rules was in conflict with 






a   mandatory   provision   of   the   applicable   law   of 






arbitration   from   which   the   parties   could   not 






derogate, that provision from the applicable law of 






the   arbitration   shall   prevail.              Ms.   Malhotra 






submitted that Rule 32 of the SIAC Rules is one of 






such   Rules   which   provides   that   if   the   seat   of 






arbitration   is   Singapore,   then   the   applicable   law 






of   arbitration   under   the   Rules   would   be   the 






International   Arbitration   Act,   2002,   of   Singapore. 






However,   Section   37(2)(b)   of   the   1996   Act   being   a 






substantive   and   non-derogable   provision,   providing 






a   right   of   appeal   to   parties   from   a   denial   of   an 






interim   measure,   such   a   provision   protects   the 






interest   of   parties   during   the   continuance   of 






arbitration   and   as   a   consequence,   Rule   32   of   the 



                              13










SIAC Rules which does not provide for an appeal, is 






in   direct   conflict   with   a   mandatory   non-derogable 






provision contained in Section 37(2)(b) of the 1996 






Act.










12.     Ms. Malhotra then went on to submit that Part I 






of the 1996 Act had not been excluded by Clause 27 






of the Agreement and the 1996 Act would, therefore, 






apply   to   the   said   Agreement.          Ms.   Malhotra 






submitted   that   in   the   decision   of   this   Court   in 






Bhatia   International  Vs.  Bulk   Trading   S.A.  [(2002) 






4  SCC  105],  which  was  reiterated  in  Venture  Global 






Engg.  Vs.  Satyam   Computer   Services   Ltd.  [(2008)   4 






SCC   190]   and  Citation   Infowares   Ltd.  Vs.  Equinox 






Corporation [(2009) 7 SCC 220], it has been clearly 






held that where the operation of Part I of the 1996 






Act   is   not   expressly   excluded   by   the   arbitration 






clause, the said Act would apply.  In any event, in 






the   instant   case,   Clause   28   of   the   Agreement 






expressly   provides   that   the   Agreement   would   be 



                               14










subject   to   the   laws   of   India   and   that   during   the 






period   of   arbitration   the   parties   to   the   Agreement 






would   carry   on   in   accordance   with   the   terms   and 






conditions   contained   therein.            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 






this   case,   though,   the   conduct   of   the   proceedings 






of arbitration would be governed by the SIAC Rules. 










13.    Ms.   Malhotra   urged   that   the   High   Court   had 






erred  in  coming  to  the  conclusion  that  since  under 






Clause  27  of  the  Agreement,  the  parties  had  agreed 






that the arbitral proceedings would be conducted in 






accordance   with   the   SIAC   Rules   and   by   virtue   of 






Rule   32   thereof,   the   jurisdiction   of   the   Indian 






Courts   stood   ousted.     Ms.   Malhotra   urged   that   the 






High   Court   had   failed   to   appreciate   the   provisions 






of   Clause   28   of   the   Agreement   while   arriving   at 






such   a   conclusion.     Ms.   Malhotra   reiterated   her 



                                      15










earlier  submissions  that  Rule  32  of  the  SIAC  Rules 






is  subject  to  Rule  1.1  thereof  which  provides  that 






if   any   of   the   said   Rules   was   in   conflict   with   the 






mandatory   provision   of   the   applicable   law   of   the 






arbitration,   from   which   the   parties   could   not 






derogate,   that   provision   shall   prevail.                          Ms. 






Malhotra   submitted   that   the   finding   of   the   High 






Court   being   contrary   to   the   provisions   agreed   upon 






by   the   parties,   such   finding   was   liable   to   be   set 






aside.     Ms.   Malhotra   submitted   that   the   very   fact 






that   the   respondents   had   approached   the   District 






Court,   Narsinghpur,   in   India   and   had   filed   an 






application   under   Section   9   of   the   1996   Act 






therein,   indicated   that   the   respondent   also 






accepted   the   applicability   of   the   1996   Act.     Ms. 






Malhotra   pointed   out   that   in   the   application   the 






respondent has indicated as follows :










     "That,   the   work   of   Contract,   which   was 


     executed         between         the         petitioner         and 


     respondent  is well  within the  jurisdiction 


     of   this   Hon'ble   Court   at   Narsinghpur. 



                                            16










       Thus,   this   Hon'ble   Court   has   jurisdiction 


       to pass an order on this application under 


       Section         9         of         the         Arbitration         and 


       Conciliation Act, 1996." 










14.    Ms.   Malhotra   urged   that   having   regard   to 






Section   42   of   the   1996   Act,   it   is   in   the   District 






Court   of   Narsinghpur   where   the   application   under 






Section   9   of   the   Arbitration   and   Conciliation   Act, 






has   been   filed   which   has   jurisdiction   over   the 






arbitral   proceedings   at   all   stages.     Ms.   Malhotra 






pointed   out   that   the   High   Court   had   erroneously 






held   that   Section   42   was   not   applicable   to   an 






appeal   and   was   applicable   only   for   filing   an 






application,   without   appreciating   the   wordings   of 






Section   42   which   provides   that   Courts   shall   have 






jurisdiction   over   the   arbitral   proceedings   also. 






Ms.   Malhotra   urged   that   with   regard   to   the   said 






findings  of  the  High  Court,  the  order  impugned  was 






liable to be set aside.   



                                           17










15.     Ms. Malhotra submitted that the stand of the 






respondent   that   in   view   of   clause   27   of   the 






Agreement,         the         law         governing         the         arbitral 






proceedings   would   be   the   SIAC   Rules,   was   not 






tenable,   in   view   of   Clause   28   which   without   any 






ambiguity   provides   that   the   Agreement   would   be 






subject   to   the   laws   of   India   and   that   during   the 






period   of   arbitration   the   parties   to   the   Agreement 






would   carry   on,   in   accordance   with   the   terms   and 






conditions   contained   therein.     Accordingly,   it   is 






the   Arbitration   and   Conciliation   Act,   1996,   which 






would   be   the   proper   law   or   the   law   governing   the 






arbitration.










16.     Ms.   Malhotra   submitted   that   apparently   there 






was   a   misconception   in   the   minds   of   the   learned 






Judges   of   the   High   Court   as   to   the   concept   of   the 






`proper   law',   of   the   Arbitration   Agreement   and   the 






`Curial Law' governing the conduct and procedure of 






the   reference.     Ms.   Malhotra   submitted   that   while 



                               18










the proper law of the Arbitration Agreement governs 






the   law   which   would   be   applicable   in   deciding   the 






disputes referred to arbitration, the Curial law is 






the  law  which  governs  the  procedural  aspect  of  the 






conduct   of   the   arbitration   proceedings.     It   was 






urged that in the instant case while the proper law 






of   the   arbitration   would   be   the   Arbitration   and 






Conciliation Act, 1996, the Curial law would be the 






SIAC   Rules   of   Singapore.   Ms.   Malhotra   submitted 






that   the   said   difference   in   the   two   concepts   had 






been   considered   by   this   Court   in  Sumitomo     Heavy 






Industries   Ltd.  Vs.  ONGC  [(1998)   1   SCC   305]   and 






NTPC  Vs.  Singer  [(1992)   3   SCC   551],   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 this Court 






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 



                                         19










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.










17.          Ms.   Malhotra   submitted   that   in   the   absence 






of   any   express   choice,   the   proper   law   of   the 






contract would be the proper law of the Arbitration 






Agreement.   Ms.   Malhotra   submitted   that   in   the 






instant case, admittedly the proper law of contract 






is the law of India and since the parties have not 






expressly   made   any   choice   regarding   the   law 






governing the Arbitration Agreement, the proper law 






of          contract,         namely,          the         Arbitration         and 






Conciliation  Act,  1996,  would  be  the  proper  law  of 






the   Arbitration   Agreement.   Ms.   Malhotra   urged   that 






ultimately   the   right   to   appeal   which   is   a 






substantive   right   under   the   1996   Act   would   be 






governed     by   the   said   Act   and   the   instant   appeal, 



                                          20










is   therefore,   liable   to   be   allowed,   and   the   order 






of   the   High   Court,   impugned   in   the   appeal,   was 






liable to be set aside.










18.      Within   the   fact   situation   indicated   on 






behalf   of   the   appellant,   Mr.   Dharmendra   Rautray, 






learned   Advocate,   appearing   for   the   respondent 






Company,   submitted   that   the   issues   involved   in   the 






present   appeal   were   (i)   whether   the   Indian   Courts 






would   have   jurisdiction   to   entertain   an   appeal 






under         Section         37         of         the         Arbitration         and 






Conciliation   Act,   1996,   against   an   interim   order 






passed   by   the   Arbitral   Tribunal   with   its   seat   in 






Singapore;     (ii)   Whether   the   "law   of   arbitration" 






would   be   the   International   Arbitration   Act,   2002, 






of   Singapore;   and   (iii)   whether   the   "Curial   law" 






would be the laws of Singapore?










19.      Mr. Rautray submitted that apparently on the 






alleged   failure   of   the   appellant   to   complete   the 






work   awarded   under   the   contract   within   the 



                              21










stipulated   period   of   30   months   from   the   date   of 






commencement   of   the   work,   the   respondent   had   to 






give   an   undertaking   to   the   National   Highways 






Authority   of   India   by   way   of   a   Supplementary 






Agreement   dated   11th  February,   2009,   to   achieve   a 






monthly rate of progress of work, failing which the 






aforesaid   authority   would   be   entitled   to   exercise 






all its rights under the main agreement and even to 






terminate   the   same   with   immediate   effect.     Mr. 






Routray submitted that on account of the failure of 






the   appellant   to   live   up   to   its   commitments,   the 






respondent   who   had   suffered   heavy   financial   loss 






and   damages   on   account   of   such   breach,   issued 






notice   of   termination   on   22nd     September,   2009, 






pursuant to Clause 23.2 of the Agreement.










20. Thereafter, the parties entered into settlement 






talks,   as   provided   for   in   Clause   26   of   the 






Agreement   and   signed   the   minutes   of   the   meeting 






dated   28th  September,   2009.     The   settlement   talks 



                                            22










between         the              parties          having              failed,            the 






respondent/claimant,   invoked   Clause   27   of   the 






Agreement   for   reference   of   the   disputes   to 






arbitration   in   accordance   with   the   Singapore 






International               Arbitration                Centre         Rules         (SIAC 






Rules).     The   respondent/claimant   filed   a   Statement 






of   Claim   on   16th  August,   2010,   before   the   Sole 






Arbitrator, Mr. Graham Easton, claiming a sum of  






221,36,91,097/-   crores   from   the   appellant.     Both 






the   parties   filed   applications   before   the   learned 






Arbitrator   seeking   interim   relief   under   Rule   24   of 






the   SIAC   Rules   on   5th                     June,   2010.   In   their 






application for interim relief under Rule 24 of the 






SIAC   Rules,   the   respondent,  inter   alia,   prayed   for 






release   of   all   plants,   machineries   and   equipment 






belonging to the respondent; injunction against the 






appellant   from   removing   all   plants,   machineries, 






equipment,   materials,   aggregates,   etc.,   owned   by 






the respondent from the work site and/or camp site; 






a   restraint   order   against   the   appellant   from 



                                           23










creating   any   third   party   interest   or   otherwise 






sell,   lease,   charge   the   plants,   machineries, 






equipment, materials, etc., at the work site and/or 






camp   site   and   to   permit   the   respondent   to   use   the 






PMEs   and   materials,   aggregates,   etc.,   for   carrying 






out   the   works   in   accordance   with   the   terms   and 






conditions         of         the         main         Agreement         and         the 






Supplementary Agreement dated 13th August, 2006.










21.     The Sole Arbitrator appointed by the SIAC by 






its   order   dated   29th                June,   2010,   directed   the 






appellant   to,  inter   alia,   release   for   use   by   the 






respondent all plants and equipment.  The appellant 






was   also   restrained   from   creating   any   third   party 






interest,   or   otherwise   to   deal   with   the   properties 






at   the   work   site   and/or   camp   site   and   permit   the 






respondent   to   use   the   aggregates   of   a   total 






quantity   of   27,580   cubic   metres   for   carrying   out 






the works.  The Sole Arbitrator, while dealing with 






the   applications   filed   by   both   the   parties   under 



                                   24










Rule   24   of   the   SIAC   Rules,   also   recorded   that   the 






interim   orders   were   being   made   with   the   object   of 






allowing   the   construction   work   on   the   project   to 






continue while the dispute between the parties were 






resolved   in   these   arbitration   proceedings   and   in 






order   to   ensure   that   the   progress   of   the   project 






was  not  hampered,  while  the  parties  waited  for  the 






outcome of the arbitration proceedings.










22.         Mr.   Routray   submitted   that   the   appeal   filed 






by   the   appellant   before   the   District   Court, 






Narasinghpur,   under   Section   37   of   the   Arbitration 






and         Conciliation         Act,         1996,         against         the 






abovementioned   order   of   the   learned   Arbitrator 






dated   29th  June,   2010,   was   dismissed   on   23rd  July, 






2010,  on  the  ground  of  maintainability  and  lack  of 






jurisdiction.  The Civil Revision filed against the 






said order was dismissed by the Madhya Pradesh High 






Court   by   its   order   dated   31st  August,   2010.     While 






dismissing   the   Revision,   the   High   Court,  inter  



                              25










alia,   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,   impliedly   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   Special   Leave 






Petition,   out   of   which   the   present   appeal   arises, 






has   been   filed   by   the   appellant   against   the   said 






order dated 31st August, 2010.










23.    Mr.   Routray   further   submitted   that   the 






parties   had,  inter   alia,   agreed   that   the   seat   of 






arbitration   would   be   Singapore   and   that   the 






arbitration   proceedings   would   be   continued   in 






accordance  with  the  SIAC  Rules,  as  per  Clause  27.1 






of   the   Agreement.     It   was   also   agreed   that   the 






proper   law   of   the   agreement/contract   dated   13th 






August,   2006,   between   the   appellant   and   the 



                               26










respondent   would   be   the   Indian   law   and   the   proper 






law of the arbitration would be the Singapore law.










24.     Mr.   Routray   submitted   that   an   application 






under   Section   9   of   the   1996   Act   was   filed   before 






the District Court on 30th  December, 2009, prior to 






the   date   of   invocation   of   the   arbitration 






proceedings   and   before   the   Curial   law,   i.e.,   the 






Singapore   law,   became   operative.           On   the   said 






application,   the   District   Judge   by   his   order   dated 






10th  March,   2010,   directed   the   applicant   to   submit 






its   case   before   the   Arbitrator   at   Singapore.     Mr. 






Routray   pointed   out   that   in   the   present   case,   the 






parties had expressly chosen the applicable laws to 






each   legal   disposition   while   entering   into   the 






Agreement   dated   13th  August,   2006.     Mr.   Routray 






submitted   that   the   parties   had   expressly   agreed 






that   the   proper   law   of   the   contract   would   be   the 






Indian Law, the proper law of the arbitration would 






be   the   Singapore   International   Arbitration   Act, 



                                27










2002   and   the   Curial   law   would   be   Singapore   law, 






since   the   seat   of   arbitration   was   in   Singapore. 






Mr.   Routray   submitted   that   as   observed   by   this 






Court   in  Sumitomo   Heavy   Industries   Ltd.  Vs.  ONGC 






Ltd.   &   Ors.  [(1998)   1   SCC   305],   the   Curial   law, 






besides   determining   the   procedural   powers   and 






duties   of   the   Arbitrators,   would   also   determine 






what   judicial   remedies   are   available   to   the 






parties, who wished to apply for security for costs 






or   for   discovery   or   who   wished   to   challenge   the 






Award   once   it   had   been   rendered   and   before   it   was 






enforced. 










25.     As   to   the   filing   of   Application   under 






Section   9   by   the   appellant   before   the   District 






Court   at   Narsinghpur,   Mr.   Routray   submitted   that 






the   High   Court   had   correctly   held   that   the 






proceedings   had   been   initiated   by   the   parties   in 






the   Court   of   District   Judge,   Narasinghpur,   before 






the   matter   was   referred   to   the   Arbitrator   and   the 



                               28










same   was   decided   taking   into   consideration   such 






circumstances.   However,   once   the   dispute   was 






referred   to   the   Arbitrator,   the   parties   could   not 






be   permitted   to   deviate   from   the   express   terms   of 






the  Agreement  under  which  the  SIAC  Rules  came  into 






operation. 










26.      Mr.   Routray   submitted   that   the   Section   9 






application   had   been   filed   before   the   Curial   law 






became   operative   and   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.  










27.    Mr.   Routray   then   proceeded   to   the   next 






important   question   as   to   whether   choice   of   the 






"seat   of   arbitration"   by   the   parties   confers 






exclusive jurisdiction on the Courts of the seat of 






arbitration to entertain matters arising out of the 






contract.  Learned counsel submitted that choice of 



                                         29










the seat of arbitration empowered the courts within 






the   seat   of   arbitration   to   have   supervisory 






jurisdiction   over   such   arbitration.     Mr.   Routray 






has referred to various decisions of English Courts 






which   had   laid   down   the   proposition   that   even   if 






the  arbitration  was  governed  by  the  law  of  another 






country, it would not entitle the objector to mount 






a   challenge   to   the   Award   in   a   country   other   than 






the   seat   of   arbitration.     It   is   not   necessary   to 






refer to the said judgments for a decision in this 






case.










28.    Mr. Routray submitted that the decision of this 






Court   in  NTPC  Vs.  Singer  (supra)   relates   to   the 






applicability   of   the   Indian   Arbitration   Act,   1940, 






and         the         Foreign         Awards         (Recognition         and 






Enforcement)   Act,   1961,   to   a   foreign   award   sought 






to   be   set   aside   in   India   under   the   provisions   of 






the   1940   Act.     It   was   submitted   that   the   said 






decisions   have   no   relevance   to   the   question   raised 



                               30










in the present case which raises the question as to 






whether   the   Indian   Courts   would   have   jurisdiction 






to entertain an appeal under Section 37 of the 1996 






Act   against   an   interim   order   of   the   Arbitral 






Tribunal,   despite   the   parties   having   expressly 






agreed   that   the   seat   of   arbitration   would   be   in 






Singapore   and   the   Curial   law   of   the   arbitration 






proceedings   would   be   the   laws   of   Singapore.     Once 






again   referring   to   the   decision   in   the  NTPC  case, 






Mr.   Routray   submitted   that   in   paragraph   46   of   the 






judgment, this Court had, inter alia, observed that 






Courts   would   give   effect   to   the   choice   of   a 






procedural   law   other   than   the   proper   law   of 






contract only where the parties had agreed that the 






matters   of   procedure   should   be   governed   by   a 






different   system   of   law.     Mr.   Routray   submitted 






that   in   the   above-mentioned   case,   this   Court   was 






dealing  with  a  challenge  to  a  "domestic  award"  and 






not a "foreign award".  Section 9(b) of the Foreign 






Awards   (Recognition   and   Enforcement)   Act,   1961, 



                                 31










provides   that   the   said   Act   would   not   apply   to   an 






award,   although,   made   outside   India,   but   which   is 






governed   by   the   laws   of   India.     Accordingly,   all 






such  awards  were  treated  as  domestic  awards  by  the 






1961   Act   and   any   challenge   to   the   said   award, 






could,   therefore,   be   brought   only   under   the 






provisions   of   the   1940   Act.     Mr.   Routray   further 






submitted   that   the   law   of   arbitration   in   the  NTPC 






case (supra) was Indian law as opposed to the facts 






of   the   present   case,   where   the   parties   had   agreed 






that   the   law   of   arbitration   would   be   the 






International Arbitration Act, 2002, of Singapore.










29.    Mr.   Routray   urged   that   by   virtue   of   Clause   27 






of   the   Agreement   dated   13th  August,   2006,   and   by 






accepting   the   SIAC   Rules,   the   parties   had   agreed 






that   Part   I   of   the   Arbitration   and   Conciliation 






Act,   1996,   would   not   apply   to   the   arbitration 






proceedings   taking   place   in   Singapore.     According 






to Mr. Routray, the said decision was reiterated in 



                                           32










the   Terms   of   Reference   that   the   arbitration 






proceedings   would   be   governed   by   the   laws   of 






Singapore.    Mr.  Routray  further  urged  that  even  in 






the   decision   relied   upon   by   the   appellant   in   the 






case   of  Bhatia   International,   this   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.                   Consequently,   in           Bhatia 






International this Court had held that exclusion of 






Part   I   of   the   1996   Act   could   be   by   virtue   of   the 






Rules   chosen   by   the   parties   to   govern   the 






arbitration proceedings.  










30.  As   far   as   applicability   of   Section   42   of   the 






1996   Act   is   concerned,   the   Jabalpur   Bench   of   the 






Madhya  Pradesh  High  Court  had  held  that  by  express 






agreement   parties   had   ousted   the   jurisdiction   of 






the         Indian         Courts,          while         the         arbitration 






proceedings   were   subsisting.   Accordingly,   the 






jurisdiction   of   the   Indian   Courts   stood   ousted 



                                          33










during         the         subsistence               of         the         arbitration 






proceedings   and,   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. 










31.    In order to appreciate the controversy that has 






arisen         regarding           the          applicability                    of         the 






provisions   of   Part   I   of   the   Arbitration   and 






Conciliation   Act,   1996,   to   the   proceedings   being 






conducted   by   the   Arbitrator   in   Singapore   in 






accordance   with   the   SIAC   Rules,   it   would   be 






necessary   to   look   at   the   arbitration   clause 






contained in the agreement entered into between the 






parties   on   13th  August,   2006.     Clause   27   of   the 






Agreement   provides   for   arbitration   and   reads   as 






follows :










       "27.   Arbitration.






       27.1        All   disputes,   differences   arising 


       out of or in connection with the Agreement 


       shall   be   referred   to   arbitration.     The 



                                              34










       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   a   dispute 


       and/or a dispute referred to arbitration."










32.    Clause   28   of   the   Agreement   describes   the 






governing law and provides as follows :










       "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 provisions."










33.    As   will   be   seen   from   Clause   27.1,   the 






arbitration   proceedings   are   to   be   conducted   in 






Singapore   in   accordance   with   the   SIAC   Rules   as   in 






force   at   the   time   of   signing   of   the   agreement. 






There   is,   therefore,   no   ambiguity   that   the 



                                35










procedural   law   with   regard   to   the   arbitration 






proceedings, is the SIAC Rules.  










34.    Clause   27.2   makes   it   clear   that   the   seat   of 






arbitration would be Singapore. 









35.    What   we   are,   therefore,   left   with   to   consider 






is the question as to what would be the law on the 






basis   whereof   the   arbitral   proceedings   were   to   be 






decided.     In   our   view,   Clause   28   of   the   Agreement 






provides   the   answer.     As   indicated   hereinabove, 






Clause   28   indicates   that   the   governing   law   of   the 






agreement   would   be   the   law   of   India,   i.e.,   the 






Arbitration   and   Conciliation   Act,   1996.              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 






arbitration   itself.     While   the   proper   law   is   the 






law   which   governs   the   agreement   itself,   in   the 






absence of any other stipulation in the arbitration 



                               36










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 






Tribunal  itself.    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.        There   is,   therefore,   no 






ambiguity   that   the   SIAC   Rules   would   be   the   Curial 






law   of   the   arbitration   proceedings.            It   also 






happens   that   the   parties   had   agreed   to   make 






Singapore   the   seat   of   arbitration.   Clause   27.1 






indicates   that   the   arbitration   proceedings   are   to 






be   conducted   in   accordance   with   the   SIAC   Rules. 






The   immediate   question   which,   therefore,   arises   is 






whether   in   such   a   case   the   provisions   of   Section 






2(2), which indicates that Part I of the above Act 






would   apply,   where   the   place   of   arbitration   is   in 






India,   would   be   a   bar   to   the   invocation   of   the 






provisions of Sections 34 and 37 of the Act, as far 



                                 37










as   the   present   arbitral   proceedings,   which   are 






being conducted in Singapore, are concerned. 










36.    In  Bhatia   International  (supra),   wherein   while 






considering the applicability of Part I of the 1996 






Act   to   arbitral   proceedings   where   the   seat   of 






arbitration   was   in   India,   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   specifically   agreed   to   exclude 






the same.  










37.    As   has   been   pointed   out   by   the   learned   Single 






Judge   in   the   order   impugned,   the   decision   in   the 






aforesaid   case   would   not   have   any   application   to 






the   facts   of   this   case,   inasmuch   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, 






which categorically provides as follows :



                                          38










       "Where         the         seat         of         arbitration               is 


       Singapore,   the   law   of   the   arbitration 


       under          these            Rules         shall          be         the 


       International   Arbitration   Act   (Cap.   143A, 


       2002   Ed,   Statutes   of   the   Republic   of 


       Singapore)   or   its   modification   or   re-


       enactment thereof."










38.    Having   agreed   to   the   above,   it   was   no   longer 






available   to   the   appellant   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.  [(2002)   4   SCC 






105], which was applied subsequently in the case of 






Venture   Global   Engg.  Vs.  Satyam   Computer   Services 






Ltd. [(2008) 4 SCC 190] and Citation Infowares Ltd. 






Vs.  Equinox   Corporation  [(2009)   7   SCC   220],   would 






have   no   application   once   the   parties   agreed   by 






virtue   of   Clause   27.1   of   the   Agreement   that   the 






arbitration   proceedings   would   be   conducted   in 






Singapore,   i.e.,   the   seat   of   arbitration   would   be 






in   Singapore,   in   accordance   with   the   Singapore 






International   Arbitration   Centre   Rules   as   in   force 



                               39










at   the   time   of   signing   of   the   Agreement.     As 






noticed   hereinabove,   Rule   32   of   the   SIAC   Rules 






provides   that   the   law   of   arbitration   would   be   the 






International Arbitration Act, 2002, where the seat 






of   arbitration   is   in   Singapore.     Although,   it   was 






pointed out on behalf of the appellant that in Rule 






1.1   it   had   been   stated   that   if   any   of   the   SIAC 






Rules   was   in   conflict   with   the   mandatory   provision 






of   the   applicable   law   of   the   arbitration,   from 






which   the   parties   could   not   derogate,   the   said 






mandatory   provision   would   prevail,   such   is   not   the 






case   as   far   as   the   present   proceedings   are 






concerned.     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.     This   Court   in  Bhatia   International 






(supra), 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.     In   the   instant 



                              40










case, once the parties had specifically agreed that 






the   arbitration   proceedings   would   be   conducted   in 






accordance with the SIAC Rules, which includes Rule 






32,   the   decision   in  Bhatia   International  and   the 






subsequent   decisions   on   the   same   lines,   would   no 






longer  apply  in  the  instant  case  where  the  parties 






had   willingly   agreed   to   be   governed   by   the   SIAC 






Rules.










39.    With regard to the effect of Section 42 of the 






Arbitration   and   Conciliation   Act,   1996,   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   became   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.



                              41










40.    We are not, therefore,   inclined   to interfere 






with   the   judgment   under   appeal   and   the   appeal   is 






accordingly   dismissed   and   all   interim   orders   are 






vacated.










41.    There will be no order as to costs.     










                                         ................................................J.


                                         (ALTAMAS KABIR)










                                         ................................................J.


                                         (CYRIAC JOSEPH)


New Delhi


Dated:01.09.2011