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2016 DIGILAW 148 (JK)

Reen Corporation v. Leighton Welspun Contractors Pvt. Ltd.

2016-03-29

DHIRAJ SINGH THAKUR

body2016
ORDER : Dhiraj Singh Thakur, J. 1. This is a petition filed under Section 8 read with Section 11 of the Jammu and Kashmir Arbitration and Conciliation Act, 1996 for appointment of an independent arbitrator to resolve disputes mentioned in the petition. 2. Briefly stated, the material facts are as under: 3. The petitioner is a proprietary concern working as contractor engaged in the execution of works contract. The petitioner entered into a sub contract with the respondents, details whereof were reduced into a written agreement dated 29-3-2011. It is asserted that major works were executed by the petitioner as a sub-contractor which otherwise had been allotted to the respondent as a contractor for which payments due to the petitioner were not made in terms of the sub-contract agreement in its entirety. 4. By virtue of notice dated 4-5-2013, the petitioner called upon the respondent to refer of the disputes in view of the arbitration clause in the agreement on account of the failure of the respondent to make the requisite payment claimed by the petitioner. 5. It appears that the respondents responded vide communication dated 23-5-2013 informing the petitioner of the full and final settlement between the parties and signing and notarizing of the final account dated 28-3-2013 by the petitioner and thus rejected the request of the petitioner for referring of the disputes to arbitration. It is in these circumstances that the present petition has been filed seeking reference of the disputes details, whereof, are reflected in the petition. 6. Objections have been filed by the respondents, questioning the maintainability of the arbitration petition before this Court. 7. It is stated that according to clause 17 of the sub-contract, the parties had agreed that in case of any dispute or difference arising out of or in connection with the sub-contract, the same would be referred and resolved by arbitration in Singapore in accordance with the arbitration rules of the Singapore International Arbitration Centre and hence it was urged that the present petition was not maintainable. Besides this, even the existence of the dispute has been denied in view of the full and final payment having been received by the petitioner pursuant whereto the petitioner had signed the statement of final account, which was duly notarized. Besides this, even the existence of the dispute has been denied in view of the full and final payment having been received by the petitioner pursuant whereto the petitioner had signed the statement of final account, which was duly notarized. It was, thus, denied that there was any payment due to the petitioner much less was there any dispute which could be raised in those circumstances by the petitioner. 8. Learned counsel for the petitioner, however, relied upon certain documents including the notice served by the petitioner upon the respondent to suggest that the petitioner had been forced to arrived at the settlement on account of blackmailing by the respondent and that no payment would be given at all if such a statement had not been signed. 9. The primary issue that arises for consideration is whether this Court has jurisdiction to entertain the present petition in view of the relevant clauses of the agreement executed between the parties, which are reproduced hereunder: "Clause 15. Law: The Sub-Contract shall be construed and governed in accordance with the laws of India and if the Sub-Contract Works or part of the Sub-Contract Works are executed in other countries, the Sub-Contractor shall comply with all applicable laws of such countries where the Sub-Contract Works or part of the Sub-Contract Works are executed.” "Clause 17. Disputes: Any dispute or difference arising out of or in connection with this Sub-Contract, including any question regarding its existence, validity or termination, shall in the first instance be amicably resolved between the authorised representatives of the Contractor and the Sub-Contractor. In the event the Contractor and the Sub-Contractor are unable to resolve the dispute or difference amicably within 30 days, such dispute or difference shall be referred and finally resolved by arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre ("The Rules"), which arbitration rules are deemed to be incorporated by reference in this clause. The Contractor or Sub-Contractor shall mutually agree on the appointment of a single arbitrator and in the event of disengagement, the single arbitrator shall be appointed in accordance with the Rules. The arbitration shall be conducted in the English language and the award of the arbitrator shall be final and binding on the Contractor and the Sub-Contractor. The procedural law of the arbitration shall be the laws of Singapore.” 10. The arbitration shall be conducted in the English language and the award of the arbitrator shall be final and binding on the Contractor and the Sub-Contractor. The procedural law of the arbitration shall be the laws of Singapore.” 10. There is in force in the State of Jammu and Kashmir, the Jammu and Kashmir Arbitration and Conciliation Act, 1997 (for short Act of 1997). 11. Section 2(1)(b) of the Act of 1997 defines "arbitration agreement" to mean an agreement referred to in section 7. 12. Section 2(1)(e) of the Act of 1997 defines "Court" to mean the Principal Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction. 13. Section 11(1)(6) of the Act of 1977 deals with the power of the Chief Justice of the High Court or any person or institution designated by him to take the necessary measure in situations where inter-alia the parties have failed to act as required under the procedure agreed upon for appointment of the arbitrator/arbitrators. This falls under Part-I of the Act. 14. Section 20 of the Act of 1997 envisages that the parties are free to agree on the place of arbitration and failing any such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. 15. Section 28 of the Act of 1997 deals with the rules applicable to the substance of the dispute and envisages that the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in the State and in accordance with the terms of the contract. 16. Section 31 of the Act of 1997 deals with the form and contents of the arbitral award and envisages that the same to be made in writing and signed by the members of the arbitral tribunal. 17. Section 36 of the Act of 1997 deal s with enforcement while Section 37 deals with appeals. 18. With a view to deal with this issue, it becomes necessary to trace the various judicial pronouncements by the Apex Court on the subject. A reference in this regard first of all is pertinent to the case of Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105 : AIR 2002 SC 1432 . 18. With a view to deal with this issue, it becomes necessary to trace the various judicial pronouncements by the Apex Court on the subject. A reference in this regard first of all is pertinent to the case of Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105 : AIR 2002 SC 1432 . That was a case where an application under Section 9 of the Arbitration and Conciliation Act, 1996 was filed before the Trial Court in Madhya Pradesh against the second respondent-appellant. The appellant raised a plea of maintainability of such an application by contending that part-I of the Act would not apply to arbitration's where the place of arbitration was not in India. According to the agreement between the parties, it was agree that the arbitration was to be held in Paris and would be governed as per the rules of the International Chamber of Commerce. This application was dismissed by the trial Court and subsequently upheld by the High Court of Madhya Pradesh in writ proceedings. Finally, the Apex Court in paragraph 32 concluded as under: (Bhatia International). "32. To conclude we hold that the provisions of Part-I would apply to all arbitration's and to all proceedings relating thereto. Where such arbitral ion is held in India the provisions of Part-I would compulsorily apply and parties are free to deviate only to the extent permitted by the delegable provisions of Part I. In eases of international commercial arbitration's held out of India provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.” 19. The view expressed in Bhatia International's case, however, was overruled by a Constitution Bench in Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552 : AIR 2012 SC (Supp) 444. What was held by the Apex Court in paragraphs 195, 196 and 197 (paras 199, 200 and 201 of AIR) was as under; (Bharal Aluminium Company). "195. with utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International and Venture Global Engineering, AIR 2002 SC 1432 . What was held by the Apex Court in paragraphs 195, 196 and 197 (paras 199, 200 and 201 of AIR) was as under; (Bharal Aluminium Company). "195. with utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International and Venture Global Engineering, AIR 2002 SC 1432 . In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part-I or in Part II of the Arbitration Act. 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part-I of the Arbitration Act, 1996 is limited to all arbitration's which take place in India. Similarly, no suit for interim injunction simpliciter would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India." "196. We conclude that Part 1 of the Arbitration Act, 1996 is applicable only to all the arbitration's which take place within the territory of India." "197. The judgment in Bhatia International was rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, that judgment in Venture Global Engineering has been rendered on 10-1-2008 in terms of the ratio of the decision in Bhatia International. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter." 20. It needs to be mentioned that in paragraph 92 of the judgment (supra), the Constitution Bench had specifically clarified that Part-I of the Act of 1996 would apply only when the seat of arbitration was in India irrespective of the kind of arbitration. 21. In Dozco India Private Limited v. Doosan Infracore Company Limited (2011) 6 SCC 179 : 2010 AIR SCW 7007, the Apex Court was considering as to whether the Court would be justified in exercising jurisdiction to appoint an arbitrator under Section 11(6) of the Act where the arbitration agreement clauses 22 and 23 specified as under (para 4 of AIR): "Article 22. Governing Laws-22.1 : This agreement shall be governed by and construed in accordance with the law s of The Republic of Korea. Governing Laws-22.1 : This agreement shall be governed by and construed in accordance with the law s of The Republic of Korea. Article 23. Arbitration - 23.1 : All disputes arising in connection with (his Agreement shall be finally settled by arbitration in Seoul, Korea (for such other place as the parties may agree in writing), pursuant to the rules of agreement then in force of the International Chamber of Commerce (Emphasis supplied)" 22. In the aforementioned case, an objection had been raised to the maintainability of the petition under Section 11(6) of the Act on the ground that in terms of the relevant clauses of the agreement, the jurisdiction of the Indian Courts has been specifically ousted. 23. In the aforementioned case, the Apex Court placed reliance upon Naviera Amazonica Peruana S.A. v. Compania International de seguros del peru wherein it was held; "All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law: (1) the law governing the substantive contract; (2) the law governing the agreement to arbitrate and the performance of that agreement; (3) the law governing the conduct of the arbitration. In the majority of the cases all three will be the same, but (1) will often be different from (2) and (3) and occasionally, but rarely, (2) may also differ from (3)". 24. Finally, in paragraph 20 of the aforementioned judgment, the Apex Court held as under: (Dozco India Private Limited) "20. In that view, my inferences are that:- (i) The clear language of Articles 22 and 23 of the distributorship agreement between the parties in this case spells out a clear agreement between the parties excluding Part-I of the Act. (ii) The law laid down in Bhatia International v. Bulk Trading S.A. and Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. AIR 2009 SC 1132 as also in Citation Info wares Ltd. v. Equinox Corpn. is not applicable to the present case. (iii) Since the interpretation of Article 23.1 suggests that the law governing the arbitration will be Korean law and the seat of arbitration will be Seoul in Korea, there will be no question of applicability of Section 11(6) of the Act and the appointment of Arbitrator in terms of that provision." 25. is not applicable to the present case. (iii) Since the interpretation of Article 23.1 suggests that the law governing the arbitration will be Korean law and the seat of arbitration will be Seoul in Korea, there will be no question of applicability of Section 11(6) of the Act and the appointment of Arbitrator in terms of that provision." 25. In Enercon (India) Limited v. Enercon GMBH (2014) 5 SCC 1 : AIR 2014 SC 3152 , the question before the Apex Court was to determine as to whether the Courts would have exclusive jurisdiction to oversee the Arbitration proceedings in view of clauses 17 and 18, which read as under: "Clause : 17. Governing Law 17.1 This Agreement and any dispute of claims arising out of or in connection with its subject-matter are governed by and construed in accordance with the Law of India. Clause : 18. Disputes And Arbitration 18.1 All disputes, controversies or differences which may arise between the parties in respect of this Agreement including without limitation to the validity, interpretation, construction performance and enforcement or alleged breach of this agreement, the parties shall, in the first instance, attempt to resolve such dispute, controversy or difference through mutual consultation. If the dispute, controversy or difference is not resolved through mutual consultation within 30 days after commencement of discussions or such longer period as the parties may agree in writing, any party may refer disputes, controversies or differences for resolution to an arbitral tribunal to consist of three (3) arbitrators, of who one will be appointed by each of the licensor and the licensee and the arbitrator appointed by licensor also act as the presiding arbitrator. 18.3 A proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be in London. The arbitrators may (but shall not be obliged to) award costs and reasonable expenses (including reasonable-fees of counsel) to the parties that substantially prevail on merit. The provisions of Indian Arbitration and Conciliation Act, 1996 shall apply. The reference of any matter, dispute or claim or arbitration pursuant to this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations of the parties to perform their respective obligations under this agreement." 26. The provisions of Indian Arbitration and Conciliation Act, 1996 shall apply. The reference of any matter, dispute or claim or arbitration pursuant to this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations of the parties to perform their respective obligations under this agreement." 26. The crucial question before the Apex Court, thus, was to determine as to where the 'seat' of arbitration lay. Whether it was in London or in India and whether the use of the phrase "venue shall be in London" actually referred to designation of the seat of arbitration in London. The Apex Court finally in paragraph 99 held as under: (Enercon (India) Limited) "99. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the Contract, the law governing the arbitration agreement and the law of arbitration/Curial law are all stated to be Indian. In such circumstances, the observation in Naviera Amazonica Peruana S.A. would become fully applicable............" 27. In Yograj Infrastructure Limited v. Ssang Yong Engineering and Construction Company Limited (2011) 9 SCC 735 : AIR 2011 SC 3517 , a similar question arose before the Apex Court, which considered clause 27 of the arbitration agreement, which envisaged as under: Clause 27. Arbitration 27.1 All disputes, differences arising out of or in connection with the agreement shall be referred to arbitration. The 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. 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 earned on without interruption and in accordance with its terms and provisions. 28. What was held by the Apex Court in paragraph 51 of the judgment (supra) was as under (para 35 of AIR): (Yograj Infrastructure Limited) "51..... During the period of Arbitration, the performance of this agreement shall be earned on without interruption and in accordance with its terms and provisions. 28. What was held by the Apex Court in paragraph 51 of the judgment (supra) was as under (para 35 of AIR): (Yograj Infrastructure Limited) "51..... 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 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." 29. In paragraph 58 of the judgment (supra), the Apex Court held as under : "58. In the instant 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. 30. A similar view has been followed by the Apex Court in Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd., 2015 (3) Law Herald (SC) 1895 : AIR 2015 SC 1504 , decided on 10-3-2015. 31. 30. A similar view has been followed by the Apex Court in Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd., 2015 (3) Law Herald (SC) 1895 : AIR 2015 SC 1504 , decided on 10-3-2015. 31. In the background of the aforementioned legal principles, it is seen that in terms of Clause 17 of the sub-contract agreement, the parties had agreed for resolution of the disputes by arbitration in Singapore in accordance with the arbitration rules of the Singapore International Arbitration Centre. The Juridical seat of arbitration was, thus, at Singapore. Not only this, the parties had agreed, in terms of the said clause, that the procedural law of arbitration would be the laws of Singapore. 32. Keeping in view the language of Clause 17, which not only determines the seat of arbitration at Singapore but also specifically provides for the curial law, which would govern the arbitration proceedings to be the laws of Singapore, there is no iota of doubt that by such an agreement, the jurisdiction of this Court to exercise powers in terms of Section 11(6) of the Act stands ousted. 33. In view of the above, the petition is found to be without merit and is accordingly dismissed. Petition dismissed.