ARBITRATION ACT = The law is well settled that where an Arbitrator had already been appointed and intimation thereof had been conveyed to the other party, a separate application for appointment of an Arbitrator is not maintainable. Once the power has been exercised under the Arbitration Agreement, there is no power left to, once again, refer the same disputes to arbitration under Section 11 of the 1996 Act, unless the order closing the proceedings is subsequently set aside. = when the Arbitral Tribunal is already seized of the disputes between the parties to the Arbitration Agreement, constitution of another Arbitral Tribunal in respect of those same issues which are already pending before the Arbitral Tribunal for adjudication, would be without jurisdiction.= In view of the language of Article 20 of the Arbitration Agreement which provided that the arbitration proceedings would be held in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL, Devas was entitled to invoke the Rules of Arbitration of the ICC for the conduct of the arbitration proceedings. Article 19 of the Agreement provided that the rights and responsibilities of the parties thereunder would be subject to and construed in accordance with the laws of India. There is, therefore, a clear distinction between the law which was to operate as the governing law of the Agreement and the law which was to govern the arbitration proceedings. Once the provisions of the ICC Rules of Arbitration had been invoked by Devas, the proceedings initiated there under could not be interfered with in a proceeding under Section 11 of the 1996 Act. The invocation of the ICC Rules would, of course, be subject to challenge in appropriate proceedings but not by way of an application under Section 11(6) of the 1996 Act. Where the parties had agreed that the procedure for the arbitration would be governed by the ICC Rules, the same would necessarily include the appointment of an Arbitral Tribunal in terms of the Arbitration Agreement and the said Rules. Arbitration Petition No.20 of 2011 under Section 11(6) of the 1996 Act for the appointment of an Arbitrator must, therefore, fail and is rejected, but this will not prevent the Petitioner from taking recourse to other provisions of the aforesaid Act for appropriate relief. The Arbitration Petition is, therefore, dismissed.

Page 1
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 20 OF 2011
ANTRIX CORP. LTD. ...PETITIONER
Vs.
DEVAS MULTIMEDIA P. LTD. ...RESPONDENT
J U D G M E N T
ALTAMAS KABIR, CJI.
1. An application under Section 11(4) read with
Section 11(10) of the Arbitration and Conciliation
Act, 1996, hereinafter referred to as "the 1996
Act", has given rise to an important question of
law relating to the scope and ambit of the powersPage 2
2
of the Chief Justice under Section 11(6) of the
said Act. In view of the importance of the
question, which has arisen, the matter which was
being heard by the delegatee of the Chief Justice,
has been referred to a larger Bench for
determination thereof.
2. M/s. Antrix Corporation Limited, the Petitioner
herein, a Government Company incorporated under the
Companies Act, 1956, and engaged in the marketing
and sale of products and services of the Indian
Space Research Organization (ISRO), entered into an
Agreement with the Respondent, Devas Multimedia P.
Ltd., hereinafter referred to as "Devas" on 28th
January, 2005, for the lease of Space Segment
Capacity on ISRO/ Antrix S-Band Spacecraft.
Article 19 of the Agreement empowered the
Petitioner to terminate the Agreement in certain
contingencies. It also provided that the AgreementPage 3
3
and the rights and responsibilities of the parties
thereunder would be subject to and construed in
accordance with the laws of India. In other words,
the domestic law would be the governing law of the
Agreement.
3. Article 20 of the Agreement deals specially
with arbitration and provides that in the event any
dispute or difference arises between the parties as
to any clause or provision of the Agreement, or as
to the interpretation thereof, or as to any account
or valuation, or as to rights and liabilities,
acts, omissions of any party, such disputes would
be referred to the senior management of both the
parties to resolve the same within 3 weeks, failing
which the matter would be referred to an
Arbitral Tribunal comprising of three Arbitrators.
It was provided that the seat of arbitration would
be New Delhi in India. It was also provided thatPage 4
4
the arbitration proceedings would be held in
accordance with the rules and procedures of the
International Chamber of Commerce (ICC) or
UNCITRAL.
4. On 25th February, 2011, the Petitioner Company
terminated the Agreement with immediate effect in
terms of Article 7(c) read with Article 11(b) of
the Agreement in keeping with the directives of the
Government, which it was bound to follow under
Article 103 of its Articles of Association. By its
letter dated 28th February, 2011, the Respondent
objected to the termination. On 15th April, 2011,
the Petitioner Company sent to the Respondent
Company a cheque for Rs. 58.37 crores refunding the
Upfront Capacity Reservation Fee received from
Devas. The said cheque was, however, returned by
Devas on 18th April, 2011, insisting that the
Agreement was still subsisting. Page 5
5
5. In keeping with the provisions of Article 20 of
the Arbitration Agreement, the Petitioner wrote to
the Respondent Company on 15th June, 2011,
nominating its senior management to discuss the
matter and to try and resolve the dispute between
the parties. However, without exhausting the
mediation process, as contemplated under Article
20(a) of the Agreement, Devas unilaterally and
without prior notice to the Petitioner, addressed a
Request for Arbitration to the ICC International
Court of Arbitration on 29th June, 2011, seeking
resolution of the dispute arising under the
Agreement. Through the unilateral Request for
Arbitration, Devas sought the constitution of an
Arbitral Tribunal in accordance with the ICC Rules
of Arbitration, hereinafter referred to as "the ICC
Rules", and nominated one Mr. V.V. Veedar, Queen's
Counsel, as its nominee Arbitrator, in accordance
with the ICC Rules. Page 6
6
6. According to the Petitioner, it is only on 5th
July, 2011, that it came to learn that Devas had
approached the ICC and had nominated Mr. V.V.
Veedar, as its nominee Arbitrator, upon receipt of
a copy of the Respondent's Request for Arbitration
forwarded by the ICC. By the said letter, the
Petitioner was also invited to nominate its nominee
Arbitrator.
7. Instead of nominating its Arbitrator, the
Petitioner, by its letter dated 11th July, 2011,
once again requested Devas to convene the Senior
Management Team meet on 27th July, 2011, in terms
of the Agreement. Pursuant to such request, a
meeting of the Senior Management Team was held, but
Devas insisted that the parties should proceed to
arbitration and did not discuss the issues in
accordance with Article 20(a) of the Agreement.
Despite the attempt to resolve the dispute throughPage 7
7
the Senior Management Team and despite the fact
that Devas had already invoked the Arbitration
Agreement by making a Request for Arbitration to
the ICC and had also appointed its nominee
Arbitrator under the ICC Rules, the Petitioner
appointed Mrs. Justice Sujata V. Manohar, as its
Arbitrator and called upon Devas to appoint its
nominee Arbitrator within 30 days of receipt of the
notice. Consequently, while Devas had invoked the
jurisdiction of the ICC on 29th June, 2011, the
Petitioner subsequently invoked the Arbitration
Agreement in accordance with the UNCITRAL Rules on
the ground that Devas had invoked ICC Rules
unilaterally, without allowing the Petitioner to
exercise its choice. Having invoked the
Arbitration Agreement under the UNCITRAL Rules, the
Petitioner called upon the Respondent to appoint
its Arbitrator within 30 days of receipt of the
notice.Page 8
8
8. On 5th August, 2011, the Petitioner wrote to
the Secretariat of the ICC Court stating that it
had appointed its Arbitrator, in accordance with
the Agreement between the parties, asserting that
in view of Article 20 of the Agreement, the
arbitral proceedings would be governed by the
Indian law, viz., the Arbitration and Conciliation
Act, 1996.
9. The Respondent did not reply to the
Petitioner's letter dated 30th July, 2011.
However, the International Chamber of Commerce, by
its letter dated 3rd August, 2011, responded to the
Petitioner's letter dated 30th July, 2011, and
indicated as follows :
"We refer to our letter dated 18
July, 2011, and remind the
parties that the issues raised
regarding the arbitration clause
would shortly be submitted to the
Court for consideration. All
comments submitted by the partiesPage 9
9
will be brought to the Court's
attention. In this regard, any
final comments from the parties
may be submitted to us by 5
August, 2011.
Should the Court decide that this
arbitration shall proceed
pursuant to Article 6(2) of the
Rules, any decision as to the
jurisdiction of the Arbitral
Tribunal shall be taken by the
Arbitral Tribunal itself."
10. It is in such circumstances that the
application under Section 11(4) read with Section
11(10) of the 1996 Act, being Arbitration Petition
No. 20 of 2011, came to be filed by the Petitioner,
inter alia, for a direction upon Devas to nominate
its Arbitrator in accordance with the Agreement
dated 28th January, 2005, and the UNCITRAL Rules,
to adjudicate upon the disputes, which had arisen
between the parties and to constitute the Arbitral
Tribunal and to proceed with the Arbitration.Page 10
10
11. The said application came to be listed before
one of us, Surinder Singh Nijjar, J., the Designate
of the Chief Justice, who was of the view that the
questions involved in the application were required
to be heard by a larger Bench. The parties were
requested to propose the questions of law to be
considered by the Larger Bench and the same are as
follows:
"i) Where the arbitration clause
contemplates the application of
either ICC Rules or UNCITRAL
Rules after the constitution of
the Tribunal, could a party
unilaterally proceed to invoke
ICC to constitute the Tribunal
and proceed thereafter?
ii) Whether the judgment of this
Hon'ble Court in TDM
Infrastructure v. UE Development
reported in (2008) 14 SCC 271
lays down the correct law with
reference to the definition of
International Commercial
Arbitration?
iii) Whether the jurisdiction of the
Court under Section 11 extendsPage 11
11
to declaring as invalid the
constitution of an arbitral
tribunal purportedly under an
arbitration agreement, especially, where the tribunal has
been constituted by an
Institution purportedly acting
under the Arbitration agreement?
iv) Whether the jurisdiction of an
arbitral tribunal constituted by
an institution purportedly
acting under an arbitration
agreement can be assailed only
before the Tribunal and in
proceedings arising from the
decision or award of such
Tribunal and not before the
Court under Section 11 of the
Act?
v) Whether, once an arbitral
tribunal has been constituted,
the Court has jurisdiction under
Section 11 of the Act to
interfere and constitute another
Tribunal?
vi) Whether an arbitration between
two Indian companies could be an
international commercial arbitration within the meaning of
Section 2(1)(f) of the Act if
the management and control of
one of the said companies is
exercised in any country other
than India?Page 12
12
vii) Whether the petition is
maintainable in light of the
reliefs claimed and whether the
conditions precedent for the
exercise of jurisdiction under
Section 11 of the Act are
satisfied or not?"
12. While the matter was pending, most of the seven
questions raised were resolved. However, the most
important issue as to whether Section 11 of the
1996 Act could be invoked when the ICC Rules had
already been invoked by one of the parties, remains
to be decided.
13. On behalf of the Petitioner, reliance was
sought to be placed on the decision of this Court
in Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd. &
Ors. [(1998) 1 SCC 305], wherein different laws
that could apply to an arbitral relationship had
been explained, namely :
(i) The proper law of the underlying contract
is the law governing the contract whichPage 13
13
creates the substantive rights and
obligations of the parties with regard to
the contract.
(ii) The proper law of the arbitration agreement
is the law governing the rights and
obligations of the parties arising from
the arbitration agreement.
(iii) The proper law of the reference is the
law governing the contract which
regulates the individual reference to
arbitration.
(iv) The curial law is the law governing the
arbitration proceedings and the manner in
which the reference has to be conducted.
It governs the procedural powers and
duties of the arbitrators, questions ofPage 14
14
evidence and the determination of the
proper law of the contract.
14. It was submitted that in the instant case, the
proper law of the contract is the Indian law and
the proper law of the Arbitration Agreement is the
Arbitration and Conciliation Act, 1996.
Accordingly, matters relating to the constitution
of the Arbitral Tribunal would be governed by
Sections 10 to 15 of the 1996 Act. It was pointed
out by learned counsel that the parties had agreed
that the arbitration proceedings could be conducted
either in accordance with the rules and procedures
of the ICC or UNCITRAL. The choice of the procedure
to be adopted by the Arbitral Tribunal in
conducting the arbitration was left to the
determination of the parties under Section 19(2) of
the 1996 Act. It was submitted that the choice of
the applicable procedural law could be exercisedPage 15
15
only after the constitution of the Arbitral
Tribunal and not at any stage prior thereto.
15. It was also submitted that in addition to the
clear provision of Section 2(2) of the 1996 Act and
the Agreement between the parties that the place of
arbitration would be New Delhi, the Agreement would
be expressly governed by Indian law under Article
19 of the Agreement. Accordingly, as was held in
National Thermal Power Corporation Vs. Singer
Company [(1992) 3 SCC 551], the proper law of the
contract would be the Indian law which would govern
the arbitration Agreement. It was submitted that
the cardinal test, as suggested by Dicey in his
"Conflict of Laws", stood fully satisfied and that
the governing law of the arbitration would be the
law chosen by the parties, or in the absence of any
agreement, the law of the country in which the
arbitration is held. Learned counsel submittedPage 16
16
that according to Dicey, the proper law of the
arbitration is normally the same as the proper law
of the contract. It is only in exceptional cases
that it is not so, even where the proper law of the
contract is expressly chosen by the parties.
16. However, as indicated hereinbefore, the
question with which we are concerned is whether the
Arbitration Agreement contemplates the application
of Section 11 of the 1996 Act after the ICC Rules
had been invoked by one of the parties which also
appointed its nominee Arbitrator. Equally important
is the question whether Section 11 of the 1996 Act
empowers the Chief Justice to constitute a Tribunal
in supersession of the Tribunal already in the
stage of constitution under the ICC Rules,
notwithstanding the fact that one of the parties
had proceeded unilaterally in the matter. Learned
counsel for the Petitioner urged that since thePage 17
17
Arbitration Agreement contemplates the constitution
of an Arbitral Tribunal without any reference to
the ICC Rules or the ICC Court, the recourse taken
by Devas to approach the ICC Court was without any
basis and was contrary to the express agreement
between the parties. Learned counsel also referred
to the decision of this Court in SBP & Co. vs.
Patel Engineering Ltd. & Anr. [(2005) 8 SCC 618],
in this regard.
17. Learned counsel further urged that the issue as
to whether once an Arbitral Tribunal has been
constituted, the Chief Justice has jurisdiction
under Section 11 of the 1996 Act to constitute
another Tribunal, presupposes that an Arbitral
Tribunal has been validly constituted and is not a
Tribunal constituted by one party acting entirely
in contravention of the Arbitration Agreement
between the parties. It was contended that tillPage 18
18
such time as the question of jurisdiction was
considered by the Court under Section 11, the
question of a separate Tribunal being constituted
by the International Chamber of Commerce did not
arise. According to learned counsel, in fact, the
constitution of the Arbitral Tribunal by the ICC
Court amounted to usurpation of the exclusive
jurisdiction of the Chief Justice under Section 11
of the 1996 Act. It was submitted that initially
the Court would have to be moved under Section 11
of the 1996 Act and it would have to examine
whether it would have the jurisdiction to entertain
the request and whether the condition for exercise
of its powers to take necessary measures to secure
the appointment of the Arbitrator, at all existed.
If the answer to both the issues was in the
affirmative, the Court was duty bound to appoint
the Arbitrator. Page 19
19
18. On the other hand, on behalf of Devas it was
submitted that the choice of an institution under
whose auspices the arbitration was to be held,
would have to be made once the Arbitral Tribunal
had been constituted. It was contended that what
was intended by the Arbitration Agreement was the
formation of an ad-hoc Tribunal which would have to
follow one of the two procedures prescribed.
19. It was submitted that Devas had already invoked
the Arbitration Agreement and had sought the
constitution of an Arbitral Tribunal, after having
chosen its nominee Arbitrator, in accordance with
the ICC Rules of Arbitration. It was further
submitted that since the Arbitral Tribunal had been
constituted under the ICC Rules, any objection as
to whether or not the Tribunal had been properly
constituted would have to be raised before the
Arbitral Tribunal itself. It is only in suchPage 20
20
objection that the Arbitral Tribunal would have to
decide as to whether a Tribunal was required to be
constituted before application of the ICC or
UNCITRAL Rules, inasmuch as, according to the
Agreement, the Claimant in the arbitration has the
right to choose any of the two Rules when
commencing the arbitration.
20. Reliance was placed on Section 16 of the 1996
Act which incorporates the Kompetenz Kompetenz
principle within its scope. Since the arbitration
was to be governed by Part I of the 1996 Act, the
Tribunal would have complete authority over all
issues, including the validity of its constitution.
21. Reference was also made to the decision of this
Court in Gas Authority of India Ltd. vs. Keti
Construction (I) Ltd. & Ors.[(2007) 5 SCC 38],
wherein the aforesaid principle contained in
Section 16 of the 1996 Act had been referred to.Page 21
21
Learned counsel submitted that in arriving at the
aforesaid decision, this Court had fully considered
its decision in SBP & Co. (supra). It was submitted
that the question regarding the validity of the
constitution of the Arbitral Tribunal, upon a
proper construction of Article 20 of the Agreement
would, therefore, have to be left for decision to
the said Tribunal.
22. On the question as to whether the Chief Justice
or his Designate would be entitled in exercise of
their jurisdiction under Section 11 of the 1996
Act, to question the validity of the appointment of
an Arbitral Tribunal, both the parties were ad idem
that they could not. It was urged that the decision
in SBP & Co. (supra) does not contemplate such a
course of action. In this regard, reference was
also made by learned counsel for the Respondent to
the decision of this Court in Sudarsan Trading Co.Page 22
22
vs. Government of Kerala & Anr. [(1989) 2 SCC 38],
wherein it was held that once there is no dispute
as to the contract, the interpretation thereof is
for the Arbitrator and not the Courts, and the
Court cannot substitute its own decision for that
taken by the learned Arbitrator. It was urged that
Section 5 of the 1996 Act also supports such
construction as it bars any interference by the
Court, except as provided in the Act. Learned
counsel also submitted that as had been held by
this Court in McDermott International Inc. vs. Burn
Standard Co. Ltd. & Ors.[(2006) 11 SCC 181], after
the 1996 Act came into force, it was for the party
questioning the authority of the Arbitrator to
raise such question at the earliest point of time
after the commencement of the Arbitration
proceedings, under Section 16 of the 1996 Act, and
a decision thereupon could be challenged under
Section 34 of the said Act. Page 23
23
23. On behalf of Devas, it was also contended that
the issue raised relating to jurisdiction falls
outside the first category of cases, on account of
the fact that the Petitioner's claim that the
Tribunal must be constituted first before
application of either of the ICC Rules or the
UNCITRAL Rules, essentially involves the question
as to whether the Arbitration clause excludes the
applicability of the Rules prior to the
constitution of the Tribunal and that the
constitution of the Tribunal is, therefore,
reserved for a decision under Section 11 of the
1996 Act. Learned counsel for the Respondent
submitted that in the facts of the case, the Chief
Justice, in exercise of his power under Section
11(6) of the 1996 Act, was not entitled to question
the validity of the appointment of the Arbitral
Tribunal and the instant Arbitration Petition was
liable to be dismissed. Page 24
24
24. As indicated hereinbefore, the question which
we are called upon to decide is whether when one of
the parties has invoked the jurisdiction of the
International Chamber of Commerce and pursuant
thereto an Arbitrator has already been appointed,
the other party to the dispute would be entitled to
proceed in terms of Section 11(6) of the 1996 Act.
25. In order to answer the said question, we will
have to refer back to the provisions relating to
arbitration in the agreement entered into between
the Petitioner and the Respondent on 28th January,
2005. Article 19 in clear terms provides that the
rights and responsibilities of the parties under
the Agreement would be subject to and construed in
accordance with the laws in India, which, in
effect, means the Arbitration and Conciliation Act,
1996. Article 20 of the Agreement specifically
deals with arbitration and provides that disputesPage 25
25
between the parties regarding the provisions of the
Agreement or the interpretation thereof, would be
referred to the Senior Management of both the
parties for resolution within three weeks, failing
which the dispute would be referred to an Arbitral
Tribunal comprising of three Arbitrators. It was
also provided that the seat of arbitration would be
New Delhi in India and the arbitration would be
conducted in accordance with the rules and
procedures of the International Chamber of Commerce
or UNCITRAL.
26. The Respondent has invoked the provisions of
Article 20 of the Agreement and has approached the
ICC for the appointment of an Arbitral Tribunal in
accordance with the rules of arbitration and,
pursuant thereto, the Respondent appointed its
nominee Arbitrator. In fact, after the Respondent
had invoked the arbitration clause, the PetitionerPage 26
26
came to know of the same from the Respondent's
request for arbitration which was forwarded by the
ICC to the Petitioner on 5th July, 2011. By the
said letter, the Petitioner was also invited by the
ICC to nominate its nominee Arbitrator, but, as
mentioned hereinbefore, instead of nominating its
Arbitrator, the Petitioner once again requested
Devas to convene the Senior Management Meet on 27th
July, 2011, in terms of the Agreement.
Simultaneously, the Petitioner appointed a former
Judge of this Court, Mrs. Sujata V. Manohar, as its
Arbitrator and informed the ICC Court accordingly.
However, disputes were also raised by the
Petitioner with the ICC that since the Agreement
clearly intended that the arbitration proceedings
would be governed by the Indian law, which was
based on the UNCITRAL model, it was not available
to the Respondent to unilaterally decide which of
the rules were to be followed. It was onlyPage 27
27
thereafter that the Petitioner took recourse to the
provisions of Section 11(4) of the 1996 Act, giving
rise to the questions which have been set out
hereinbefore in paragraph 11, of which only one has
survived for our consideration.
27. Section 11 of the 1996 Act is very clear as to
the circumstances in which parties to a dispute,
and governed by an Arbitration Agreement, may apply
for the appointment of an Arbitrator by the Chief
Justice of the High Court or the Supreme Court.
For the sake of reference, the relevant provisions
of Section 11 are reproduced hereinbelow :-
"11. Appointment of arbitrators.
(1) A person of any nationality may be an
arbitrator, unless otherwise agreed by the
parties.
(2) Subject to sub-section (6), the
parties are free to agree on a procedure
for appointing the arbitrator or
arbitrators.Page 28
28
(3) Failing any agreement referred to in
sub-section (2), in an arbitration with
three arbitrators, each party shall appoint
one arbitrator, and the two appointed
arbitrators shall appoint the third
arbitrator who shall act as the presiding
arbitrator.
(4) If the appointment procedure in subsection (3) applies and-
(a) a party fails to appoint an
arbitrator within thirty days from the
receipt of a request to do so from the
other party; or
(b) the two appointed arbitrators fail
to agree on the third arbitrator
within thirty days from the date of
their appointment,
the appointment shall be made, upon request
of a party, by the Chief Justice or any
person or institution designated by him.
(5) Failing any agreement referred to in
sub-section (2), in an arbitration with a
sole arbitrator, if the parties fail to
agree on the arbitrator within thirty days
from receipt of a request by one party from
the other party to so agree the appointment
shall be made, upon request of a party, by
the Chief Justice or any person or
institution designated by him.
(6) Where, under an appointment procedure
agreed upon by the parties,-Page 29
29
(a) a party fails to act as required
under that procedure; or
(b) the parties, or the two appointed
arbitrators, fail to reach an
agreement expected of them under that
procedure; or
(c) a person, including an
institution, fails to perform any
function entrusted to him or it under
that procedure,
a party may request the Chief Justice or
any person or institution designated by him
to take the necessary measure, unless the
agreement on the appointment procedure
provides other means for securing the
appointment.
(7) A decision on a matter entrusted by
sub-section (4) or sub-section (5) or subsection (6) to the Chief Justice or the
person or institution designated by him is
final."
28. As will be evident from the aforesaid
provisions, when any of the parties to an
Arbitration Agreement fails to act in terms
thereof, on the application of the other party, the
Chief Justice of the High Courts and the SupremePage 30
30
Court, in different situations, may appoint an
Arbitrator.
29. In the instant case, Devas, without responding
to the Petitioner's letter written in terms of
Article 20 of the Arbitration Agreement,
unilaterally addressed a Request for Arbitration to
the ICC International Court of Arbitration for
resolution of the disputes arising under the
Agreement and also appointed its nominee
Arbitrator. On the other hand, the Petitioner
appointed its nominee Arbitrator with the caveat
that the arbitration would be governed by the 1996
Act and called upon Devas to appoint its nominee
Arbitrator under the said provisions. As Devas did
not respond to the Petitioner's letter dated 30th
July, 2011, the Petitioner filed the application
under Section 11(6) of the 1996 Act. Page 31
31
30. In the instant case, the Arbitration Agreement
provides that the arbitration proceedings would be
held in accordance with the rules and procedures of
the International Chamber of Commerce or UNCITRAL.
Rightly or wrongly, Devas made a request for
arbitration to the ICC International Court of
Arbitration on 29th June, 2011, in accordance with
the aforesaid Agreement and one Mr. V.V. Veedar was
appointed by Devas as its nominee Arbitrator. By
the letter written by the International Chamber of
Commerce on 5th July, 2011, the Petitioner was
required to appoint its nominee Arbitrator, but it
chose not to do so and instead made an application
under Section 11(6) of the 1996 Act and also
indicated that it had appointed Mrs. Justice Sujata
V. Manohar, as its Arbitrator in terms of Article
20(9) of the Agreement. Page 32
32
31. The matter is not as complex as it seems and in
our view, once the Arbitration Agreement had been
invoked by Devas and a nominee Arbitrator had also
been appointed by it, the Arbitration Agreement
could not have been invoked for a second time by
the Petitioner, which was fully aware of the
appointment made by the Respondent. It would lead
to an anomalous state of affairs if the appointment
of an Arbitrator once made, could be questioned in
a subsequent proceeding initiated by the other
party also for the appointment of an Arbitrator.
In our view, while the Petitioner was certainly
entitled to challenge the appointment of the
Arbitrator at the instance of Devas, it could not
do so by way of an independent proceeding under
Section 11(6) of the 1996 Act. While power has
been vested in the Chief Justice to appoint an
Arbitrator under Section 11(6) of the 1996 Act,
such appointment can be questioned under Section 13Page 33
33
thereof. In a proceeding under Section 11 of the
1996 Act, the Chief Justice cannot replace one
Arbitrator already appointed in exercise of the
Arbitration Agreement. It may be noted that in
case of Gesellschaft Fur Biotechnologische Forschun
GMBH Vs. Kopran Laboratories Ltd. & Anr. [(2004) 13
SCC 630], a learned Single Judge of the Bombay High
Court, while hearing an appeal under Section 8 of
the 1996 Act, directed the claims/disputes of the
parties to be referred to the sole arbitration of a
retired Chief Justice with the venue at Bombay,
despite the fact that under the Arbitration
Agreement it had been indicated that any disputes,
controversy or claim arising out of or in relation
to the Agreement, would be settled by arbitration
in accordance with the Rules of Reconciliation of
the International Chamber of Commerce, Paris, with
the venue of arbitration in Bombay, Maharashtra,
India. This Court held that when there was aPage 34
34
deviation from the methodology for appointment of
an Arbitrator, it was incumbent on the part of the
Chief Justice to assign reasons for such departure.
32. Sub-Section (6) of Section 11 of the 1996 Act,
quite categorically provides that where the parties
fail to act in terms of a procedure agreed upon by
them, the provisions of Sub-Section (6) may be
invoked by any of the parties. Where in terms of
the Agreement, the arbitration clause has already
been invoked by one of the parties thereto under
the I.C.C. Rules, the provisions of Sub-section (6)
cannot be invoked again, and, in case the other
party is dissatisfied or aggrieved by the
appointment of an Arbitrator in terms of the
Agreement, his/its remedy would be by way of a
petition under Section 13, and, thereafter, under
Section 34 of the 1996 Act. Page 35
35
33. The law is well settled that where an
Arbitrator had already been appointed and
intimation thereof had been conveyed to the other
party, a separate application for appointment of an
Arbitrator is not maintainable. Once the power has
been exercised under the Arbitration Agreement,
there is no power left to, once again, refer the
same disputes to arbitration under Section 11 of
the 1996 Act, unless the order closing the
proceedings is subsequently set aside. 
In Som Datt
Builders Pvt. Ltd. Vs. State of Punjab [2006 (3)
RAJ 144 (P&H)], the Division Bench of the Punjab &
Haryana High Court held, and
we agree with the
finding, that
when the Arbitral Tribunal is already
seized of the disputes between the parties to the
Arbitration Agreement, constitution of another
Arbitral Tribunal in respect of those same issues
which are already pending before the Arbitral
Page 36
36
Tribunal for adjudication, would be without
jurisdiction.
34. In view of the language of Article 20 of the
Arbitration Agreement which provided that the
arbitration proceedings would be held in accordance
with the rules and procedures of the International
Chamber of Commerce or UNCITRAL,
 Devas was entitled
to invoke the Rules of Arbitration of the ICC for
the conduct of the arbitration proceedings.
Article 19 of the Agreement provided that the
rights and responsibilities of the parties
thereunder would be subject to and construed in
accordance with the laws of India. 
There is,
therefore, a clear distinction between the law
which was to operate as the governing law of the
Agreement and the law which was to govern the
arbitration proceedings. 
Once the provisions of the
ICC Rules of Arbitration had been invoked by Devas,
Page 37
37
the proceedings initiated thereunder could not be
interfered with in a proceeding under Section 11 of
the 1996 Act. 
The invocation of the ICC Rules
would, of course, be subject to challenge in
appropriate proceedings but not by way of an
application under Section 11(6) of the 1996 Act.

Where the parties had agreed that the procedure for
the arbitration would be governed by the ICC Rules,
the same would necessarily include the appointment
of an Arbitral Tribunal in terms of the Arbitration
Agreement and the said Rules. 
Arbitration Petition
No.20 of 2011 under Section 11(6) of the 1996 Act
for the appointment of an Arbitrator must,
therefore, fail and is rejected, but this will not
prevent the Petitioner from taking recourse to
other provisions of the aforesaid Act for
appropriate relief. 
Page 38
38
35. The Arbitration Petition is, therefore,
dismissed. 
36. Having regard to the facts of the case, each
party shall bear its own costs.
...................CJI.
(ALTAMAS KABIR)
.....................J.
(SURINDER SINGH NIJJAR)
New Delhi
Dated: May 10, 2013.

The scope of interference under Section 34 of the Act does not permit the Court to re-examine and re-appreciate the evidence in order to come to a different conclusion only because it is possible to do so. The Court is also not inclined to examine the correspondence between the parties to which both counsel referred to substantiate their respective positions as regards which party should be held responsible for the performance tests not having taken place as envisaged by the contract. The conclusion drawn by the Tribunal on appreciation of the evidence placed before it is a perfectly plausible one. As regards the submission that JK did not produce documentary evidence of making a payment of Rs. 2.58 crores to Enmas, indeed it does not appear that such contention was raised before the Tribunal. ALIL cannot be permitted to raise this issue at this stage. 35. No grounds have been made out for interference with the impugned Award of the Tribunal under Section 34 of the Act. The petition is dismissed with costs of Rs. 30,000/- which will be paid by ALIL to JK within a period of four weeks from today. The bank guarantee furnished by JK shall stand discharged.

OMP No. 402 of 2005 Page 1 of 25
IN THE HIGH COURT OF DELHI AT NEW DELHI
O.M.P. No. 402/2005
Reserved on: February 10, 2012
Decision on: March 5, 2012
ALFA LAVAL (INDIA) LTD. ..... Petitioner
Through: Mr. V.P. Singh and Mr. D.S. Narula, Senior
Advocates with Mr. S. Vaidyaligam and
Mr. A.S. Narula, Advocates.
versus
J.K. PAPER LIMITED & ORS. ..... Respondents
Through: Mr. Parag P. Tripathi, Senior Advocate with
Mr. Shadan Farasat, Mr. A. Ganguli,
Mr. A.T. Patra, Mr. Ramesh, Advocates.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
05.03.2012
1. The challenge in this petition under Section 34 of the Arbitration and
Conciliation act 1996 (‘Act’) by the Petitioner Alfa Laval (India) Limited
(‘ALIL’) is to an Award dated 11th August 2005 passed by the Arbitral
Tribunal (‘Tribunal’) holding that ALIL will pay the Respondent J.K. Paper
Limited (‘JK’) [formerly known as JK Corporation Limited] a sum of Rs.
1,71,09,439/- within six months from the date of receipt of the Award with
interest @ 7% per annum on the unpaid part of the said amount, if any, from
the date of the Award till the date of actual payment.
Background facts
2. ALIL is a subsidiary of Alfa Laval AB, a multinational corporation
headquartered in Sweden which deals, inter alia, in planning, engineering,
manufacturing and commissioning of machines for Black Liquor Evaporator
OMP No. 402 of 2005 Page 2 of 25
Plants. ALIL states that since 1968 it has had a technical tie-up with APV
Anhydro of Denmark for technical knowhow of ‘falling film evaporation
plants’. It claims to have executed more than 200 dryer and evaporator
projects in various industries in India.
3. JK is a company registered under the Companies Act, 1956 and has a
paper mill at Rayagada in Orissa. The paper mill consists of a pulping
section and a chemical recovery section. JK was desirous of obtaining a
superior technology evaporator plant to process 600 Tons Per Day (‘TPD’)
of black liquor solids producing concentrated black liquor with 65% of total
solids (‘TS’). In 1995 JK engaged the services of the SPB Projects and
Consultancy Limited (‘the Consultant’) for detailed engineering and
evaluation of the expansion of JK’s paper mill at Rayagada in Orissa. It was
stated that an integral part of the whole expansion project was a ‘Tubular
Falling Film Black Liquor Evaporation Plant’ in the recovery section of
JK’s paper mill. It was stated that the Consultant floated an enquiry and
short listed ALIL as well as three other companies, Enmas, Larsen &
Toubro Limited and Pass Engineering Limited. After evaluating the
technical specifications and expertise in the field, the Consultant shortlisted
ALIL. It was further stated that during the meeting thereafter held between
ALIL and JK, the drawings, design specifications and other technical details
of the plant in line with the requirements of JK were discussed at length,
cross-compared with those of the other bidders and approved by JK. At the
meeting held on 6th July 1995 between the representatives of JK, ALIL and
APV Anhydro, JK specified that the plant is to be designed on the basis of
feed (furnish) of 40% hardwood and 60% bamboo. On 27th November 1995
ALIL confirmed that the basis of design of the said plant would be based on
liquor characteristics from a furnish of 40% mixed hardwood and 60%
bamboo coming out of Kraft pulping process.
OMP No. 402 of 2005 Page 3 of 25
4. On 19th January 1996 ALIL and JK entered into a contract for supply,
erection and commissioning of seven bodies with one standby falling black
liquor evaporation plant at a contract price of Rs. 10,09,07,000/-, inclusive
of all taxes, duties etc. It was to be a 120 TPH evaporator plant with a
production capacity guarantee to process 600 TPD Black Liquor solids with
product liquor concentration of 65% TS. In terms of the contract ALIL
furnished to JK three Performance Guarantees (‘PGs’) in the sum of Rs.
1,01,36,050. In terms of Clause 13 of the said contract, the limit of damages
was fixed at 10% of the value of the contract.
5. According to ALIL, the plant was supplied and erected in terms of the
approved drawings in June 1997 and made ready for commissioning by 15th
July 1997. It is claimed by ALIL that the plant was thoroughly inspected and
found to be as per the approved design and description. According to ALIL,
the said plant was run in August 1997 and made ready for continuous trial
runs. According to the ALIL, JK expressed that continuous trial runs at
100% capacity and 65% concentration would be possible only after two and
a half to three months. ALIL claimed that the said plant was run at 65%
concentration intermittently for 3 to 10 hours for five days. It was stated that
on being satisfied with the performance and its capabilities, JK took over the
plant for regular operation and maintenance on 13th November 1997. By a
letter dated 8th December 1997 addressed to ALIL, JK admitted that they
were producing product black liquor of 65% solids concentration from the
said plant for their new recovery boiler trial run. It is stated by ALIL that JK
also admitted that the new recovery boiler was commissioned in April 1998.
6. On 10th January 1998 JK wrote to ALIL stating that the full load
performance trial of the evaporation plant would be conducted “after
rectification of all process and mechanical problems” including “nitric acid
OMP No. 402 of 2005 Page 4 of 25
cleaning, Auma actuated valve problems in standby body changing”, low
temperature of product liquor, trimming of impeller of Akay pumps etc.
Another letter was sent by JK to ALIL on 9th July 1998 stating that they
would like to carry out full load performance trial of the evaporator plant
and further that the “AUMA actuator main steam valve problem may please
be got attended prior to above performance trial as this job is pending since
long.” By a further letter dated 23rd July 1998 JK requested ALIL to depute
the concerned engineer for carrying out the full load performance trial from
27th July 1998. According to ALIL, between November 1997 and July 1998
JK had run the plant without proper support and without proper cleaning of
calendrias.
7. As noted by the Tribunal in para 6 of the impugned Award, and from the
charts submitted to this Court during the hearing, it is seen that in the
pulping section ‘wood and bamboo chips’ are mixed with ‘white liquor’ and
fed into a ‘digester’. The resultant product is subject to filtration. At this
stage the pulp is taken out and the by-product which is ‘weak black liquor’
(‘WBL’) with 15-17% solids at 70-77 degree Celsius is fed into the
evaporator plant. The resultant concentrated black liquor consisting of 65%
TS @ 102 degree Celsius is fed to the recovery boiler. There it is processed
with organic chemicals, burnt and then sent for a weak wash with hot water
which results in ‘green liquor.’ This then fed back into the ‘pulping section’.
The evaporator plant is, therefore, an integral part of the total chemical
recovery process of the paper mill. The performance as well as the operation
of the plant depends on the upstream process like ‘pulp mill’ and downstream
process which comprises the feed going into the recovery boiler. The
plant is designed as a seven effect falling film tubular evaporator. However,
there are eight bodies as the first body is equipped as a stand-by effect.
OMP No. 402 of 2005 Page 5 of 25
8. According to ALIL, JK insisted that one set of impellers should be
trimmed before the performance test could be carried out. According to
ALIL although JK was assured that the said job would be taken care of
during the full load performance trials, JK threatened to encash the bank
guarantee of Rs. 1,01,36,050. ALIL was therefore constrained to trim the
impellers in October 1998. According to ALIL, even then JK did not release
to ALIL the balance outstanding payment of Rs. 20,15,465 towards the cost
of the plant. ALIL stated that it could not undertake the performance test
between December 1998 and March 1999 since the paper mill at Rayagada
in Orissa was under a lockout. Thereafter JK, without first cleaning the
plant, operated the same. According to ALIL, during the warranty period for
defects liability, i.e., 12 months from the date of commissioning or 18
months from the date of last despatch, whichever is earlier, there was no
complaint received by it from JK of any major defects requiring replacement
including the first tubular body and its standby.
9. ALIL stated that after the mill reopened in March 1999, repeated efforts
were made by ALIL to get the said plant ready for performance tests. But
this was met with stiff resistance by JK on one ground or the other.
According to ALIL, the performance test conducted in September/October
1999 revealed deviations made by JK against the design relating to feed
temperature, pulping raw material etc.
10. ALIL stated that it received a letter dated 13th November 1999 from its
Bank informing it that JK had invoked bank guarantees totalling Rs.
1,01,36,050/-. ALIL filed a petition under Section 9 of the Act in this Court
to restrain JK from encashing the bank guarantees. The said petition was
rejected. Even before ALIL’s appeal against the order could be heard before
the Division Bench, JK encashed the bank guarantees. Thereafter, the
OMP No. 402 of 2005 Page 6 of 25
disputes were referred to arbitration. The two learned arbitrators nominated
by each party appointed the presiding Arbitrator.
Arbitral Proceedings
11. ALIL filed a statement of claim, inter alia, claiming that JK should pay
it (i) a sum of Rs. 1,01,36,050/- with further interest on Rs. 1,07,44,213/ @
24% per annum from the date of filing of the statement of claims till its
realization (ii) a sum of Rs. 23,33,816/- together with interest @ 24% per
annum from the date of filing of the statement of claim till the date of
payment and (iii) a sum of Rs. 13,70,439/- together with interest @ 24% per
annum from the date of filing of the statement of claims till realization as
well costs of arbitration.
12. In its reply before the Tribunal, JK stated that an additional guarantee
had been provided by ALIL that in case 65% TS output concentration of
liquor was not achieved, ‘ALIL shall replace, free of cost, the first tubular
body and its standby with plate type and the modifications and for
replacement on this account shall be done by ALIL at no cost to the
company.’ JK pointed out that the performance guarantee was extended
thrice, i.e., first upto 28th February 1999, next upto 22nd August 1999 and
finally upto 22nd February 2000. JK denied that ALIL had successfully
erected the plant. According to JK, although the work for commissioning of
the plant was commenced in August 1997, the plant could not achieve the
parameters. It was denied that the hardware related problems could have
been attended to by JK itself. JK denied that it was not ready for
performance trial of the plant. It maintained that ALIL had failed to conduct
the full load performance trial of the evaporator plant. ALIL was also
alleged not to have extended the period of bank guarantee in the sum of Rs.
20,90,700 resulting in JK not remitting payments to ALIL. It was stated that
OMP No. 402 of 2005 Page 7 of 25
although there was a lock out between December 1998 and first week of
March 1999 ALIL was not on that account prevented from conducting a full
load performance trial run. JK maintained that in March 1999 ALIL
requested JK to fabricate modified distribution plates for Calendrias I and II
with increased hole diameter which was the responsibility of ALIL but was
shifted to JK. It was alleged that the details supplied by ALIL for fabrication
of distribution plates were also not correct and were subsequently corrected
by a fax dated 1st April 1999. The delay in conducting the performance trial
was attributable to ALIL. It demonstrated the method of nitric acid cleaning
to JK only in April 1998, i.e., five months after the operation and handing
over of the plant on 13th November 1997 to JK. JK also stated that ALIL did
not carry out acid cleaning in place (‘CIP’) before the plant was handed over
to JK. It requested ALIL to agree to a proposal of cleaning of bodies I, II
and III one by one. It was stated by JK that on practical grounds it was
appropriate for JK not to agree to ALIL’s proposal. JK also filed its counter
claims in the sum of Rs. 13,24,01,300/- after giving credit to ALIL for the
bank guarantee of Rs. 1,00,90,700/- enchased by JK with interest @ 24%
per annum with costs.
13. At the hearing before the Tribunal on 10th January 2000 both parties
consented that Mr. Sarju Singh, former CMD, Hindustan Paper Corporation
and Director (Technical) of Indian Agro-Paper Mills’ Association
(‘IAPMA’) be appointed as an independent expert to carry out an inspection
of the plant and submit a report to the Tribunal. The expert was to opine on
the present technical condition and status of the plant and the extent to
which it had been functional. Pursuant thereto, Mr. Sarju Singh filed a
detailed report on 18th February 2000. Objections were filed to the said
report.
OMP No. 402 of 2005 Page 8 of 25
14. On the basis of the pleadings of the parties, the following issues were
framed by the Tribunal:
“1. Whether the evaporator plant as supplied by M/s. Alfa
Laval fulfils the parameters and standards of the supply
contract or is it defective in any respect?
2. Is the claim raised by JK Corporation within the period of
warranty under the terms of the contract?
3. Whether JK Corporation have incurred losses as claimed,
if so, to what extent are they entitled to be compensated?
4. Whether invocation of bank guarantees by JK Corporation
was legal and proper?
5. Whether both the parties under the supply contract have
fulfilled their duties and obligations thereunder and, if not,
what are the consequences?
6. Is the damages for breach of guaranteed performance
limited to 10% of the contract price as contended by Alfa
Laval to JK Corporation?
7. Whether JK Corporation is entitled to the claim of Rs.
13,70,439/- mentioned in prayer (c) of the claim of Alfa
Laval?
8. Whether JK Corporation is justified in withholding the
balance payment of Rs. 23,33,816/- with interest, as claimed?
9. To what relief the respective parties are entitled to?”
The Arbitral Award
15. The Tribunal took up the first two issues together. Issue No. 2 was
answered in the affirmative. It was held that both the parties had shown
laxity in the observance and fulfilment of the contractual requirement under
Article 21 (1) read with Article 12 (vi) concerning of commissioning of the
plant. Since JK was not claiming under the warranty clause, it had to be “left
out of account.” It was held that although JK took over the plant and
commissioned it in its paper mill with effect from 13th November 1997, that
OMP No. 402 of 2005 Page 9 of 25
date could not be taken as the date relevant for purposes of Article 12 (vi)
whose stipulations had not been complied with and therefore ALIL could
not be relieved of its obligation to prove the performance guarantee within
six months of commissioning of the plant. Since the conditions in Article 12
(vi) read with Article 21 (1) had not been complied with, the contention of
ALIL that JK’s claim was beyond the warranty period could not be
accepted.
16. Turning to Issue No.1, the Tribunal noted that the basic foundation for
the contract between the parties was the assurance in the representations
held out by ALIL that it had expertise in the installation of tubular type
water evaporators with the technical back up of APV Anhydro and its
technical staff. It was a new technology and ALIL claimed to have installed
it in two plants in India prior to entering into agreement with JK. It was held
by the Tribunal that if the important parameters specified in Section 1 of
Schedule A and Article 13 were not satisfied, then ALIL would in any way
have to pay damages to JK. The Tribunal then noted the conclusions in para
11.4 of Mr. Sarju Singh’s report and proceeded to deal with ALIL’s
defences. It was held that the plea of ALIL that it was only on account of
lack of capacity of JK’s recovery boilers to handle black liquor at 600 TPD
that hindered achieving the targets was not acceptable and no specific query
in that regard was put to the expert witness Mr. A.S. Krishna, an assistant of
Mr. Sarju Singh. As regards the contention of ALIL that the plant was
capable of producing 65% concentration black liquor, the Tribunal noticed
that at the trial runs taken on 4th October 1999 in the presence of the
representatives of JK, ALIL and APV Anhydro the net utilisation of the
capacity was only 58% without any fault being attributed to JK.
Consequently, it was concluded by the Tribunal that “there is no doubt that
the plant did not yield black liquor with 65% TS concentration as required
OMP No. 402 of 2005 Page 10 of 25
by the contract.” The plea of ALIL that JK failed to maintain proper ratio of
bamboo and pulp in the feed, and that this in turn resulted in the plant failing
to achieve the required parameters, was held not to have been substantiated
by any evidence. The expert had made no adverse comments on the high
level of the injection temperature. As regards the condenser temperature the
expert had in para 8.1.4.2 of his report concluded that there was no major
fault in the condenser.
17. The Tribunal held that the correspondence exchanged between the
parties showed that “the evaporator plant was not functioning as per the
design parameters”. The plant indeed had not been commissioned as per the
contract but “neither party can be exclusively blamed for this situation nor
both have to take the consequences of there being no ‘date of
commissioning’ within the meaning of the contract.” It was further held that
this point was not very significant except for the purpose of defence of
limitation in relation to the claim of liquidated damages under Article 13,
which however was not claimed by JK. Referring to the additional guarantee
in the contract it was held by the Tribunal that ALIL was obliged to replace,
at its own cost, the first tubular body and its stand by with a plate type body
at no extra cost. It was held that JK was entitled to be reimbursed by ALIL
in the sum of Rs. 2,58,00,000/-, which was the cost incurred by JK for the
replacement.
18. JK’s claim under Issue No. 3 for losses was upheld only to the extent of
Rs. 40 lakhs towards excess expenditure on electricity and Rs. 2.58 crores in
respect of the replacement of one plate type lamilla. It was held that the
amount of guarantee encashed by JK, i.e., Rs. 1,01,36,050/- would be
deducted from the damages of Rs. 2,98,00,000/- awarded to JK. The
Tribunal further held that ALIL could not be burdened with the cost of all
OMP No. 402 of 2005 Page 11 of 25
the modifications and improvements made by JK but was clearly liable to
the extent of the cost incurred for the substitution of the first effect by a
body-type lamilla. The claim of ALIL for a sum of Rs. 13,70,439/- was not
entertained. The Tribunal held that JK was not justified in withholding the
balance payment of Rs. 15,15,465/-. This amount was accordingly awarded
to ALIL with 9% interest from 14th November 1997 till the date of
realization and 7% from the date of Award till the date of actual payment. In
conclusion, the it was held by the Tribunal that ALIL will pay JK a sum of
Rs. 1,71,09,439/- within six months and interest 7% per annum on the
unpaid part of the said amount from the date of the Award till the date of
payment.
19. By an order dated 7th February 2006, ALIL was directed by the Court to
deposit the awarded amount in the form of a fixed deposit. After this was
done, by an order dated 17th September 2008, JK was permitted to withdraw
the amount subject furnishing a bank guarantee.
Submissions of counsel
20. It was first contended by Mr. V.P. Singh, learned Senior counsel for
ALIL that the Award was given after expiry of one year and eight months
from the conclusion of arguments and that some of the submissions were not
dealt with. It was submitted that delay in pronouncing the Award was by
itself a reason to set aside the Award as being opposed to the public policy
of India. It was further submitted that the demand by JK for replacement of
the first tubular body on the ground that 65% TS concentration was not
achieved on continuous basis, was made for the first time in December 1998
which was 13 months after the plant was commissioned and during which
time JK had been running the plant without proper maintenance. It is
submitted that with the Tribunal holding that neither party could be blamed
OMP No. 402 of 2005 Page 12 of 25
for not ensuring that the performance trial took place as envisaged in the
agreement, JK would be precluded from claiming any damages on that
score. It is submitted that Article 14 of the agreement provided for
warranties and the discovery of any difficulty was required to be
communicated immediately in writing by JK to ALIL. The outer limit for
replacement of defective parts was 12 months from the date of
commissioning or 18 months from the date of last despatch, whichever was
earlier. Even assuming that there was uncertainty about the date of
commissioning, no complaint was received from JK within 18 months
period from the date of last despatch. According to Mr. V.P. Singh, there
was no additional guarantee under Article 12 (viii) or Article 13 and it was
mere reiteration of the other guarantees contained in the earlier parts of the
agreement. The central thrust of the argument of the Petitioner is that by not
holding the performance trials, by not ensuring proper feed and by not
cleaning or maintaining it more than 13 months after the date of
commissioning, JK could not hold ALIL responsible for the failure of the
plant. It was submitted that the findings of the Tribunal are against the terms
of the contract. What ALIL was liable to do under Article 12 (viii) was only
to ‘replace free of cost, the first tubular body and its standby with plate type
body’ and not provide anything in addition to the tubular body. The contract
entered into by JK with Enmas clearly showed that it was seeking an
additional tubular body and not its replacement. Reliance is placed on the
decision of the Supreme Court in McDermott International Inc. v. Burn
Standard Co. Limited (2006) 11 SCC 181 where it was observed that in the
assessment of damages, “the Court must consider only strict legal
obligations and not the expectations, however reasonable, of one contractor
that the other will do something that he has assumed no legal obligation to
do.” Finally, it was submitted that although JK claimed to have incurred a
cost of Rs. 2.58 crore to replace the body-type lamilla, it did not actually
OMP No. 402 of 2005 Page 13 of 25
provide any proof of having made such payment to Enmas. Mr. Singh
pointed out that by the time Mr. Sarju Singh visited the plant in February
2000 it had already been in operation for several months and his
observations made long after the actual commissioning of the plant would
not actually indicate whether it was capable of achieving the parameters
soon after the commissioning of the plant. He reiterated that a demand for
replacement could not have been made after 18 months of the expiry of the
last despatch.
21. Mr. Parag P. Tripathi, learned Senior counsel appearing for JK
submitted that the very basis of the entire agreement was that the assurances
by ALIL that the new technology which was sourced from APV Anhydro
was a new technology using tubular evaporators instead of plate type
evaporators. Referring to the clause concerning performance guarantee he
submitted that at no point in time ALIL had run the plant continuously for
72 hours to demonstrate that there was output of 65% TS. He emphasized
that Clause 9 in Section 6 of the Schedule Act of the Agreement which
pertained to performance guarantees made it incumbent on ALIL to replace
the first tubular body and its standby in case the output of 65% TS was not
achieved. He submitted that Mr. Sarju Singh, an expert appointed by the
Tribunal opined that the plant could have never achieved 65% TS
concentration at any point in time. Since there was no reference to the clause
concerning warranties the limitation period specified thereunder did not
apply. There was also no claim for liquidated damages. There was no claim
with reference to Article 15 as well. As regards the problem of scaling of the
bodies it is pointed out that this was an anticipated problem which is why
ALIL had assured that “a cleaning in place (CIP) system shall be provided
for cleaning effect E-1 and its standby”. There was no effective crossexamination
of the expert to substantiate the plea of ALIL that the failure of
OMP No. 402 of 2005 Page 14 of 25
the plant to achieve full capacity was on account of improper feed by JK or
individual capacity of the boiler plant. As regards the proof of payment of
the cost of replacement of the first body to Enmas, it was submitted that this
issue was never raised before the Tribunal.
Delay in pronouncing the Award
22. As regards the first ground of delay in the Tribunal pronouncing the
Award, it is seen that the impugned Award has discussed the entire evidence
in great detail and given elaborate reasons for the conclusions issue-wise. In
the circumstances, this Court is not inclined to entertain the challenge to the
legality of the impugned Award only on the ground that there was a delay in
the Award being pronounced after conclusion of the final arguments. In
other words, the delay in pronouncing the Award itself is not a sufficient
ground to hold that it was opposed to public policy of India as contended by
ALIL.
Delay in JK raising a claim
23. One of the submissions of ALIL is that if at all JK wanted to raise a
claim in regard to the defective plant, it should have invoked Article 14 of
the contract within the period specified thereunder and not have waited till
13 months after the commissioning of the plant. Article 14 of the contract
reads as under:
“14. Alfa Laval’s liabilities for defects:
Alfa Laval shall be liable in accordance with the sub-Section
(i) and (ii) below for all defects of whatsoever nature in the
supplies made by them. The term defect includes lack of any
normal property, quality, design, workmanship or
performance guarantees in the contract.
OMP No. 402 of 2005 Page 15 of 25
(i) All parts which within 12 months from the date of
commissioning or 18 months from the date of last despatch
of equipment whichever is earlier shall become unserviceable
or shall have their usefulness materially impaired, by any
cause whatsoever such as faulty design, inferior material or
bad workmanship the same shall be repaired or replaced by
Alfa Laval free of cost to the company at company’s works.
The discovery of any defect shall be immediately
communicated in writing to Alfa Laval. Alfa Laval
undertakes to replace and/or repair with least possible delay
and in reasonable time such defective part or equipment and
in case the same is not done in reasonable time, the company
shall have full right and liberty but no obligation of procuring
such equipment or getting the same repaired from any source
at the entire cost, risk and responsibility of Alfa Laval.
(ii) The guarantee by Alfa Laval mentioned above shall apply
irrespective of any part or machinery and equipment having
been procured by the Alfa Laval from any other
manufacturer.”
24. There are two periods stated in Article 14 (i) within which a claim in
respect of defects in the supplies can be made. The first is within 12 months
from the date of commissioning and the other within 18 months from the
date of last despatch. In the event that JK found any difficulty in any of the
parts for any cause whatsoever such as faulty design, inferior material or bad
workmanship, it was required to communicate in writing to ALIL
immediately and then ALIL would replace that part or repair it “at least
possible delay and in reasonable time”. While ALIL’s understanding of
what this clause requires is correct, the submission fails to account for the
fact that JK did not invoke this clause. In other words, as was reiterated by
Mr. Parag Tripathi, learned Senior counsel for JK during arguments, JK did
not lay its claim with reference to Article 14 at all. The Tribunal too noted in
the impugned Award that there is no claim made by JK with reference to the
warranty under Article 14. While rejecting a similar plea of ALIL, the
Tribunal has noted that irrespective of Article 14, JK could claim damages
OMP No. 402 of 2005 Page 16 of 25
for supply of a defective plant, with reference to the other clauses of the
contract. The Curt finds no error in the said conclusion and concurs with it.
ALIL’s liability to replace the first tubular body and stand by
25. The central issue before the Tribunal was whether the black evaporator
equipment erected by ALIL met the required parameters. The clauses of the
contract relevant to this issue are as under:
“Article 12 – Guarantee by ALFA Laval
(i) That the plant, machinery and equipment to be supplied
by them shall be new and suitable and capable to render the
desired performance to the entire satisfaction of the company
and shall be free from any defect of whatsoever nature
including those arising from the use of any defective
materials or faulty design in the manufacture thereof or bad
workmanship.
(ii) That each item of the plant, machinery and equipment
shall be manufactured in accordance with the specifications
contained in Schedule ‘A’ of this contract.
(iii) That each item of plant, machinery and equipment
supplied shall operate efficiently and in the manner stipulated
in the specifications and as intended in Schedule ‘A’ hereto.
(iv) ALFA Laval guarantee that the evaporator plant to be
supplied by ALFA Laval shall be designed and are
guaranteed for the following performance:-
ALFA Laval guarantees the following at 100% MCR.
1) Black Liquor solids handling T/24 hr
600
2) Water evaporation capacity with feed T/hr
120
Feed con. of 15.8% total solids at 20 deg c
and product liquor con. of 65% TS at 120 deg C
OMP No. 402 of 2005 Page 17 of 25
3) Product liquor concentration %TS by weight
65
4) Steam economy (T.water evaporated T/S 6.1
4/- 2% per T of LP steam)
5) Power consumption for pumps KWH 301 4/-
2% included in scope of supply (in
operation to achieve 120TPH water
evaporation capacity)
6) Maximum permissible entrainment 1 PM
150 through fooled condensate
NaOH
7) Cooling water to surface condenser Co.M/hr
1550 @ 35 deg c. (including inter condenser)
v) To prove the fulfilment of the performance guarantees
mentioned herein, tests on the performance of the machinery
and equipment shall be carried out as early as practicable
after the plant is put into operation but not later than three
months after the date of completion and starting of the plant.
vi) Unless otherwise agreed between the company and ALFA
Laval tests shall be carried out each last a continuous span of
72 hours. The tests shall be taken in the presence of and with
the assistance of ALFA Laval’s Technician assigned for this
purpose. If in the said tests the required outputs and
conditions are not proved and/or the said tests reveal defects
and/or deficiencies which prevent the attainment of output
stated in Schedule ‘A’ hereto the tests would be repeated as
often as necessary. However, the performance guarantees
shall have to be proved within six months from the date of
commissioning of the plant. The proof of satisfactory results
shall be a statement of results obtained with technical data
and comments signed jointly by the persons authorised by
ALFA Laval and the company in this regard. At every test,
the statement of results obtained with technical comments
and agreed proposals for replacements, alterations and/or
additions necessary, if any, shall be made and signed jointly
by persons authorised b y the company and ALFA Laval for
the said tests.
OMP No. 402 of 2005 Page 18 of 25
vii) ALFA Laval undertake that if for reasons attributable to
ALFA Laval these tests are not satisfactory to the company
they shall rectify and/or cause to rectify the defect either by
modifying or completely replacing such defective
machineries or any part thereof to prove the performance set
out in Schedule ‘A’ hereto.
viii) ALFA Laval undertake that in case the 65% output
concentration of liquor is not achieved ALFA Laval shall
replace free of cost, the first tabular body and its standby
with plate type and the modifications and for replacements
on this account shall be done by ALFA Laval at no cost to
the company.
ix) ALFA Laval shall be deemed to have fulfilled their
guarantees upon the issue of the company’s notification
under the hand of the President (Paper) of the company,
which shall not be unreasonably withheld, that the company
is satisfied in regard to the various guarantees by ALFA
Laval. Such notification shall be issued soon after tests for
proving the guarantees are carried out and the performance is
found by the company in conformity with the performance
guarantees set out in the contract.”
21. General
(i) The commissioning of the plant, machinery and
equipment for the purposes of this contract shall mean the
date on which the entirely of the plant, machinery and
equipment supplied under this contract are commissioned for
commercial production at full capacity. Alfa Laval and the
company through their authorised representatives shall sign
the certificate recording the date of commissioning of the
plant, machinery and equipment and such certificate alone
shall be the evidence to show for the purposes of this contract
the date of commissioning of the plant, machinery and
equipment.
(ii) The date of despatch of the last consignment of the plant,
machinery and equipment under this agreement shall be the
OMP No. 402 of 2005 Page 19 of 25
date confirmed to the company by Alfa Laval to be the date
of despatch of the last consignment and accepted as such by
the company.”
26. The above clauses have to be read cumulatively to understand when
according to the contract the ‘commissioning of the plant’ can be said to
have taken place. IN terms of Article 21 (1) the commissioning takes place
on the date “the entirely of the plant, machinery and equipment supplied
under this contract are commissioned for commercial production at full
capacity”. Further representatives of ALIL were to sign a certificate
recording the date of such commissioning and such certificate “alone shall
be conclusive evidence” of the date of commissioning. Admittedly, there
was no such certificate of commissioning issued in the instant case.
Therefore the Tribunal was called upon to investigate why the
commissioning of the plant as envisaged by Article 21 (1) did not take place.
27. Under Article 12 (v) “the performance tests on the performance of the
machinery and equipment shall be carried out after the plant is put into
operation but not later than three months after the date of completion and
starting of the plant.” The case of ALIL, as already noticed hereinabove by
the Tribunal, was that the plant was commissioned and taken over by JK on
13th November 1997. The relevant portion of the minutes of the Meeting
held between ALIL and JK on 13th November 1997 reads as under:
“Minutes of meeting held between Alfa Laval (I) Limited
and J.K. Corporation Limited Jaykaypur on 13th November
1997
Persons present:
M/s. J.K. Corp Ltd. Ms. ALIL
1. Mr. V.K. Oswal 1. Mr. Prashant S. Dravid
OMP No. 402 of 2005 Page 20 of 25
2. Mr. M.L. Devram 2. Mr. V.V. Pathak
3. Mr. Ashok
Srivastava
Sub.: 120 TPH Black Liquor Evaporator Plant Contract No.
13/95-96 dated 19th January 1996.
1. During the various trials, the plant has been run at various
capacities from 50% upto 115% at 50-55% TS. The
concentration of 65% also has been tried for continuous short
of 16 hrs on 29th October 1997 and plant was run at 65%
intermittently for 3 to 10 hours for a few days.
The plant is being taken over by JKCL for regular operation
and maintenance. Presently the plant is being run continuously
at 50% to 55% outlet concentration to feed existing recovery
boiler and expected to run at 65% concentration from 20th/21st
November 1997. During this run JKCL requested Ms/ ALIL
Engineer to be present for few days in order to observe
working at 65% solids continuously and to stabilize plant at
65% solids.
2. Regarding performance JCKL informed that performance
trials shall be conducted in the month of January/February
1998.”
28. The above minutes show that upto that date the plant was run at various
capacities ‘concentration of 65% TS’ for continuous short ‘duration of 16
hrs’ on 29th October 1997 and the plant was run at ‘65% intermittently for 3
to 10 hours for a few days.’ Clearly by that date the performance tests as
envisaged by the contract had not been conducted. They were expected to be
conducted in the month of January/February 1998. The performance trials
did not take place on the said dates. Both the parties had referred to the
correspondence exchange between them to show that either was not
responsible for postponement of the conduct of the performance trials which
ultimately never took place. In fact, the Tribunal has observed that “neither
of the parties completely fulfilled its obligations under the contract but
OMP No. 402 of 2005 Page 21 of 25
allowed matters to drift by ad hoc modifications and improvements without
insistence on Article 21.”
29. The Court finds that no error has been committed by the Tribunal in
coming to the above conclusion. Indeed, the correspondence showed that JK
had been making complaints about scaling and consequent clogging, the
need for constant cleaning and trimming the impellers. ALIL appears to
have been attending to some of these complaints and writing to JK regarding
installation of a new boiler, modification of distributor plate, constant
periodical cleaning in place, repairs of condensers. The full load
performance test had become impossible after the system had started
operating and was interconnected to JK’s paper mill plant and the plant
could not be shut down for a period long enough to carry out the actual
performance trials. However, as pointed out by the Tribunal the fact that the
performance trial could not be carried out as envisaged in the contract did
not mean that ALIL was totally absolved of its liability for the failure of the
plant to meet the design parameters of performance. Under Article 12 (vii),
if the failure to hold performance tests was on account of ALIL, then ALIL
“shall rectify and/or cause to rectify the defect either by modifying or
completely replacing such defective machineries or any part thereof to prove
the performance set out in Schedule ‘A’”. However, the guarantee under
Article 12 (viii) is specific to the plant failing to produce black liquor of
65% TS concentration. Since this was central to the contract it was agreed
that if this parameter were to fail, then “ALIL shall replace free of cost, the
first tubular body and its standby with plate type body.” These guarantees
have to be read together with Schedule A which is divided into 11 sections
which set out the various design parameters, general description of
evaporator plant, specification of various equipments etc. Section 6 relates
to performance guarantee. Clause 9 of Section 6 states as under:
OMP No. 402 of 2005 Page 22 of 25
“9. Alfa Laval have additionally guaranteed that in the event,
Alfa Laval observe that the output concentration of 65% not
being maintained as per the performance guarantee, Alfa
Laval shall replace free of cost, the first tubular body and its
standby with plate type body and the modification required
on this account shall be done by Alfa Laval at no additional
cost to the company.”
30. The interpretation placed on the above clause by the Tribunal in
concluding that even where the performance trials were not held within time
and in the manner envisaged under the contract, ALIL could not be relieved
of its obligation to replace the first tubular body for failure to achieve 65%
TS concentration, cannot be said to be erroneous. The intention of the
parties in this regard is made even more explicit in Article 13 which
specifies the extent of LD payable to JK by ALIL for failure of the plant to
achieve production capacity, water evaporation capacity, steam economy,
power consumption, “alkali carry over in condensate expressed in term of
PPM NaOH”, and product liquor concentration. Article 13 specifies that
“the damages set out within each of the following guarantees category
below are not cumulative but independent of each other.” In the penultimate
para of Article 13 it is stated “ALFA LAVAL have additionally guaranteed
that in the vent of outlet concentration not being achieved at 65% solids,
other parameters remaining as per contract, Alfa Laval shall replace free of
cost the first tubular body and its stand by with plate type body at no extra
cost.” A collective reading of Article 12 (viii), with Clause 9 of Section 6 of
Schedule A and the additional guarantee under Article 13 supports the
conclusion drawn by the Tribunal that ALIL would be liable to pay damages
to JK if the parameters set out thereunder were not satisfied.
31. ALIL’s case, which was rejected by the Tribunal, was that the “other
parameters” that Article 13 mentions were required to be ensured by JK and
since they were not, the plant could not produce the black liquor of desired
OMP No. 402 of 2005 Page 23 of 25
concentration although it was capable of doing so. In approaching this issue,
the Tribunal has gone by the report of Mr. Sarju Singh, the expert appointed
by it, and the evidence that emerged during the hearings of the Tribunal. The
Tribunal while dealing with the issue concerning the handling capacity of
the boiler noted the contention of ALIL that even according to Mr. Sarju
Singh, JK applied for expansion of the additional mill including a new
recovery boiler to handle 300 TPD black liquor solid at 65% concentration
and that the effective handling capacity of the boiler with JK was only 510
TPD. It also noted the contention of JK that 510 TPD represented the
capacity of the restructured evaporator for which JK had contracted with
Enmas and this restricted capacity was intentional as JK was able to replace
only one of the bodies by a plate type lamilla due to financial constraints.
The Tribunal then proceeded to observe as under:
“29. This controversy would have been easily settled by
ALIL putting this to A.S. Krishna, Assistant of Mr. Sarju
Singh, who was cross-examined by it in length. A number of
questions were put to him about the handing capacities of the
new boilers, storage tanks for liquids of different
concentration and so on. ALIL had indeed raised objections
to Mr. Sarju Singh’s report which were replied to by Mr.
Sarju Singh on 24th April 200 (V.13). Mr. Sarju Singh has
clearly stated in his report that the black liquor handling
capacity of the evaporator was far below the contract
parameters and if ALIL wanted to say that this deficiency
was attributable not to the evaporator but due to the
inadequacy of JK’s boiler they should have put a specific
query to the expert to that effect and got the point cleared.
Also, as correctly pointed out for JK, the stage of boiler
handling is subsequent to that of the evaporator and the
question of availability of a boiler which could have handled
600 TPD of solid concentration is totally irrelevant to the
issue. At no point of time did ALIL tell JK that the nonavailability
of boiler of adequate capacity was hindering their
achievement of targets. In this state of the record, as it is, it is
difficult to accept this explanation of ALIL that this
parameter was fulfilled by ALIL’s plant.”
OMP No. 402 of 2005 Page 24 of 25
32. It is difficult to appreciate the contention of ALIL that the above
conclusion of the Tribunal is either contrary to the evidence on record or to
the clause of the contract. Mr. Sarju Singh has in his report stated that “the
black liquor handling capacity of the evaporator was far below the contract
parameters.” It was apparent that at no point in time the plant achieved 65%
TS concentration. This was considered by the Tribunal in some detail in
para 30 of its impugned Award where it noticed that in answer to question
No. 34, Mr. Sarju Singh conceded the theoretical possibility of the plant
achieving 65% TS concentration but in fact the said target was achieved
only occasionally. The Tribunal analysed the correspondence between the
parties in some detail and then concluded as under:
“There is, therefore, no doubt that the plant did not yield
black liquor with 65% TS concentration as required by the
contract. That the plant could not achieve this and other
parameters as per the contract is borne out by attempts on the
part of ALIL to attribute faults to JK in various respects for
the deficient working of the system.”
33. The Tribunal also considered the point concerning the variation in feed.
Referring to the evidence of Mr. A.S. Krishna, the expert from of the
Central Pulp & Paper Research Institute, it observed as under:
“It is also interesting to see that while general questions were
put to Sri A. Krishna on the possibility of feed variation
affecting the characteristics of the liquor (p.v. 16, Qns 35 to
38) no question was put to him that the concentration output
of the black liquor would have been affected by the variation
in the composition of the feed to the paper mill. In fact A.
Krishna in his answer 36 clearly supports the present stand
taken by JK. Insofar as the point made regarding a change of
pulp unit process by JK, the answer of A. Krishna (answers
11 to 15) does not substantiate the plea of ALIL. If the
composition of the feed were as important as is now sought
to be made out, ALIL should have carried out preliminary
inspection about this parameter and satisfied themselves that
it was alright. The contention that the change in the
composition of the feed as between hardwood and bamboo
OMP No. 402 of 2005 Page 25 of 25
would have called for a different type of design and that the
specifications of the subsequent contract with Enmas support
this plea has not been substantiated by any evidence.”
34. The scope of interference under Section 34 of the Act does not permit
the Court to re-examine and re-appreciate the evidence in order to come to a
different conclusion only because it is possible to do so. The Court is also
not inclined to examine the correspondence between the parties to which
both counsel referred to substantiate their respective positions as regards
which party should be held responsible for the performance tests not having
taken place as envisaged by the contract. The conclusion drawn by the
Tribunal on appreciation of the evidence placed before it is a perfectly
plausible one. As regards the submission that JK did not produce
documentary evidence of making a payment of Rs. 2.58 crores to Enmas,
indeed it does not appear that such contention was raised before the
Tribunal. ALIL cannot be permitted to raise this issue at this stage.
35. No grounds have been made out for interference with the impugned
Award of the Tribunal under Section 34 of the Act. The petition is dismissed
with costs of Rs. 30,000/- which will be paid by ALIL to JK within a period
of four weeks from today. The bank guarantee furnished by JK shall stand
discharged.
S. MURALIDHAR, J.
MARCH 5, 2012
rk

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