East Coast Shipping Ltd. v. M. J. Scrap Pvt. Ltd. — 1997 DIGILAW 86 (CAL)

JUDGMENT The Court: This application has been made under Ss. 8 and 9 of the Arbitration and Conciliation Act, 1996, in respect of an arbitration proceeding being conducted in London in accordance with English law, as per the arbitration clause contained in the agreement entered into between the parties on 5th September, 1996. 2. The application has initially been heard on the question of maintainability in view of the provisions of sub-s. (2) of s. 2 of the aforesaid Act, which provides as follows :- "(2) This Part shall apply where the place of arbitration is in India." 3. Appearing in support of the application, Mr. Gautam Chakraborty submitted that on first impression it would seem that the application was hit by the aforesaid provision, but on closer scrutiny it would be clear that the bar imposed by sub-so (2) of S. 2 was conditional and not absolute and was subject to the exceptions contained in sub-ss. (3), (4) and (5) of s. 2 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the "1996 Act". 4. Mr. Chakraborty submitted that the Arbitration and Conciliation Act, 1996, had been enacted on the model law on International Commercial Arbitration adopted in 1985 by the United Nations Commission on International Trade Law in order to give it a global scope and to achieve uniformity of the law relating to arbitral proceedings in the sphere of international commercial arbitration. 5. Referring to sub-so (3) of S. 2 of the 1996 Act, Mr. Chakraborty urged that certain disputes, which may not be submitted to arbitration under a particular law had been excluded from the operation of Part I of the 1996 Act which contains the general provisions relating to arbitral proceedings upto the stage of passing of the Award, its enforcement and appeals. 6. Mr. Chakraborty urged that the provisions of Ss. 46 and 47 of the Arbitration Act, 1940, hereinafter referred to as the "1940 Act", had been incorporated in the 1996 Act as sub-ss. (4) and (5) of S. 2, with the object of bringing all arbitral proceedings, with the exception of those indicated in sub-so (4) and those excluded by any other law or agreement between India and any other country or countries, within the scope of Part I of the 1996 Act, notwithstanding the bar imposed under sub-so (2). 7. Mr. (4) and (5) of S. 2, with the object of bringing all arbitral proceedings, with the exception of those indicated in sub-so (4) and those excluded by any other law or agreement between India and any other country or countries, within the scope of Part I of the 1996 Act, notwithstanding the bar imposed under sub-so (2). 7. Mr. Chakraborty urged that unless such a harmonious construction was given to the provisions of sub-ss. (2), (3), (4) and (5) of S. 2 of the 1996 Act, the intention of the legislature expressed with such clarity in sub-so (5), would be rendered redundant, and the Indian courts would have no jurisdiction to entertain any matter in relation to arbitral proceedings being conducted outside of India. 8. Mr. Chakraborty submitted that the provisions of sub-so (5) of S. 2 of the 1996 Act would have to be read in the context of S. 85 thereof, which, inter alia, repeals the provisions of the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961. 9. Mr. Chakraborty urged that the present application was maintainable, even though the arbitral proceedings were being conducted in London, having particular regard to the provisions of sub-so (5) of S. 2 of the 1996 Act, and that unless interim protection, as prayed for, was given, the petitioner would not be able to realise anything from the respondents even if ultimately an Award was passed in its favour. 10. Mr. Chakraborty urged that it could not have been the intention of the legislature to render the Indian courts powerless to provide interim protection under Ss. 8 and 9 of the 1996 Act in respect of arbitral proceedings being conducted outside of India, even though the subject matter of dispute may be within the jurisdiction of the Indian courts. 11. Opposing the application on behalf of the respondent Company, Mr. S. K. Kapoor submitted that the language of sub-so (2) of S. 2 of the 1996 Act was very clear and specific in excluding from the scope of Part I of the said Act, all arbitral proceedings being conducted outside of India, as in the instant case. 12. Mr. Kapoor urged that sub-ss. S. K. Kapoor submitted that the language of sub-so (2) of S. 2 of the 1996 Act was very clear and specific in excluding from the scope of Part I of the said Act, all arbitral proceedings being conducted outside of India, as in the instant case. 12. Mr. Kapoor urged that sub-ss. (3), (4) and (5) of S. 2 further excluded from the operation of Part I such proceedings as were specifically kept out of the purview of arbitral proceedings, or provided for inclusion of such arbitral proceedings for which provision had been made under other enactments, such as the Indian Electricity Act, 1910. Mr. Kapoor submitted that the provisions of sub-so (5) would have to be read along with the provisions of sub-so (2), and if Mr. Chakraborty's interpretation was to be accepted, the provisions of sub-so (2) would be rendered otiose and meaningless, which could not have been the intention of the legislature. 13. Mr. Kapoor then urged that the model law on International Commercial Arbitration which had been adopted by the United Nations Commission on International Trade Law (UNCITRAL) had intended that the provisions similar to Ss. 8 and 9 of the 1996 Act would have application even if the place of arbitration was in a different State. However, while enacting the 1996 Act on the said model, the legislature thought it fit to deviate therefrom and excluded Ss. 8 and 9 from the operation of Part-I of the Act. 14. Mr. Kapoor contended that the provisions of sub-ss. (3), (4) and (5) of S. 2 of the 1996 Act' would have to be read along with the provisions of subs. (2) thereof. He submitted that the bar imposed under sub-so (2) also controlled the provisions of sub-ss. (3), (4) and (5) and such bar was intended by the legislature to apply to all cases were the place of arbitration was outside India. 15. In support of his said submissions, Mr. Kapoor referred to certain observations made by the Hon'ble Supreme Court in the case of J.K. Cotton, Spinning and Weaving Mills Company Ltd. vs. State of Uttar Pradesh and Ors., reported in AIR 1961 SC at page 1170, where similar sentiments were expressed. He also referred to certain other decisions on the same lines to which reference will be made, if necessary. 16. Mr. He also referred to certain other decisions on the same lines to which reference will be made, if necessary. 16. Mr. Kapoor urged that even on merits, except for some vague allegations made in paragraph 22 of the petition, no case had been made out for grant of interim protection, as prayed for therein. 17. Mr. Kapoor submitted that the application was wholly misconceived and was liable to be dismissed in-limine. 18. On a plain reading of the provisions of sub-ss. (2), (3), (4) and (5) of s. 2 of the 1996 Act, it is apparent that the point of demurrer taken by Mr. Kapoor has a good deal of substance. 19. Sub-sections (2), (3), (4) and (5) of s. 2 determines the scope of the applicability of Part-I of the 1996 Act to arbitral proceedings in different circumstances. 20. Sub-section (2) of s. 2 leaves no room for doubt that Part-I of the 1996 Act, relating to the general provisions of arbitration, wil1 apply only in cases where the place of arbitration is in India and the provisions of sub-ss. (3), (4) and (5) wil1 have to be read accordingly. In my view, the provisions of sub-ss.(3), (4) and (5) of s. 2 are controlled by sub-so (2) and cannot widen the scope thereof to include arbitral proceedings being conducted outside of India. 21. As has been pointed out by Mr. Gautam Chakraborty, sub-so (3) of S. 2 excludes certain disputes from the operation of Part-I of the 1996 Act, which may not be submitted to arbitration under a particular law. 22. As far as sub-so (4) is concerned, it brings within the scope of the Act all arbitral proceedings provided for in other enactments except in cases where the provisions of Part-I are inconsistent with any other enactment or any Rules made thereunder. 23. It is, therefore, evident that while sub-so (3) seeks to exclude certain disputes from the operation of Part-I of the 1996 Act, sub-so (4) seeks to extend its scope to certain arbitral proceedings provided by statute. The same, however, have no relevance to the facts at issue in the instant case. 24. Sub-section (5), on which much reliance has been placed by Mr. Chakraborty, cannot be read in isolation of sub-so (2) as an exception thereto, as otherwise the provisions of sub-so (2) will be rendered otiose. The same, however, have no relevance to the facts at issue in the instant case. 24. Sub-section (5), on which much reliance has been placed by Mr. Chakraborty, cannot be read in isolation of sub-so (2) as an exception thereto, as otherwise the provisions of sub-so (2) will be rendered otiose. Sub-section (5) merely indicates that subject to the provisions of sub-so (4) and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country, the provisions of Part-I of the 1996 Act will apply to all arbitral proceedings relating to such laws or agreements. It does not extend the application of Part-I to arbitral proceedings where the place of arbitration is not in India. 25. Needless to say, it is now well-established that while interpreting statutes the Courts must always presume that the legislature in its wisdom intended that every part of the statute should have effect. The submissions made on behalf of the petitioner that sub-so (5) would lift the bar imposed under sub-so (2), irrespective of the place of arbitration, would 'run contrary to such well-established precepts and must, therefore, be rejected. 26. We cannot also lose sight of the fact that the global scope of Art. 1(2) of the UNCITRAL Model Law on International Commercial Arbitration was consciously omitted from the 1996 Act, thereby confining the scope of Part-I thereof only to arbitration proceedings where the place of arbitration is in India. According to Art. 1(2) of the Model Law, the provisions of Arts. 8, 9, 35 and 36 would apply even if the place of arbitration was not within the territory of the particular State and the remedy thereunder would be international in its character. Sub-so (2) of S. 2 of the 1996 Act does not provide for such an exception and clearly indicates that the provisions of Part-I will apply to arbitration proceedings where the place of arbitration it; in India. The deviation from the Model Law reveals the intention of the legislature to limit the scope of Part-I of the Act to arbitration proceedings where the place of arbitration is in India. 27. The deviation from the Model Law reveals the intention of the legislature to limit the scope of Part-I of the Act to arbitration proceedings where the place of arbitration is in India. 27. The present application, in my view, comes squarely within the bar imposed under sub-so (2), inasmuch as, the place of arbitration is admittedly in London, and is not, therefore, maintainable in this Court. The point of demurrer taken by Mr. Kapoor is upheld and the said application is accordingly, dismissed. 28. There will, however, be no order as to costs. 29. All parties to act on a signed copy of the operative part of this judgment on the usual undertaking. 30. Stay of this judgment is prayed for and refused as no purpose will be served thereby. Application dismissed.