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High Court Of Delhi
NATIONAL THERMAL POWER CORPORATION LIMITED - Appellant
Versus
SINGER CO. - Respondent
First Appeal (OS) 1021 of 1990
Decided On : 02/12/1991
Arbitration - Interim Award - Applicability of Indian Arbitration Act, 1940 - Contract between Indian and Foreign Party - Arbitration to be conducted as per I.C.C. Rules - Venue of Arbitration at discretion of Arbitrators - Interim Award made in London - Whether Indian Arbitration Act applicable - Held, No - Proper law of arbitration proceedings is law of country where arbitration held - Interim Award not subject to Indian Arbitration Act.
Fact of the Case:
Appellant, an Indian company, entered into two formal agreements with the respondent, a foreign company, for the design, manufacture, testing, and supply of equipment and materials for a computer-based training simulator. The agreements incorporated the General Conditions of Contract, which included provisions for arbitration. Article 4.1 of the agreements provided that disputes would be settled by arbitration as specified in Clauses 26.0 and 27.0 of the General Conditions of Contract, excluding Clauses 27.6.1 and 27.6.2. Clause 27.6.2 specifically dealt with the applicability of the provisions of the Indian Arbitration Act, 1940, and the venue of arbitration being at New Delhi. However, this clause was excluded in the present case. A dispute arose between the parties, and the respondent made a request for arbitration before the Court of Arbitration of the International Chamber of Commerce (ICC) in Paris. The ICC appointed a panel of arbitrators, and the arbitration proceedings were held in London. The arbitrators made an interim partial award in London. The appellant filed an application in the Delhi High Court under Sections 14, 30, and 33 of the Indian Arbitration Act, 1940, seeking to set aside the interim award. The High Court dismissed the application, holding that the provisions of the Indian Arbitration Act were not applicable to the arbitration proceedings.
Finding of the Court:
The Delhi High Court held that the provisions of the Indian Arbitration Act, 1940, were not applicable to the arbitration proceedings between the appellant and the respondent. The court observed that the agreements between the parties specifically excluded the applicability of Clauses 27.6.1 and 27.6.2 of the General Conditions of Contract, which dealt with the applicability of the Indian Arbitration Act and the venue of arbitration being at New Delhi. The court further noted that the arbitration proceedings were held in London, and the interim award was made there. Therefore, the court held that the proper law of the arbitration proceedings was the law of England, and the interim award was not subject to the Indian Arbitration Act.
Issues: 1. Whether the provisions of the Indian Arbitration Act, 1940, were applicable to the arbitration proceedings between the appellant and the respondent. 2. Whether the interim award made in London was subject to the Indian Arbitration Act.
Ratio Decidendi: 1. The proper law of arbitration proceedings is the law of the country where the arbitration is held. 2. In the absence of a specific provision in the arbitration agreement making the Indian Arbitration Act applicable, the interim award made in London was not subject to the Indian Arbitration Act.
Final Decision: The Delhi High Court's decision dismissing the appellant's application to set aside the interim award was upheld. The Supreme Court held that the High Court was correct in holding that the provisions of the Indian Arbitration Act were not applicable to the arbitration proceedings and that the interim award was not subject to the Indian Arbitration Act.
( 1 ) THE question which arises for consideration in this appeal is whether the provisions of the. Indian Arbitration Act, 1940 (hereinafter referred to as the Arbitrationact) are applicable to an interim award made at London byan Arbitral Tribunal constituted by I. C. C Court of Arbitrationof the International Chamber of Commerce, Paris.
( 2 ) BRIEFLY stated, the facts are that vide two letters dated 14/02/1981 the appellant had accepted the proposalof and had awarded contracts to the respondent. This wasfollowed by the parties executing two formal agreements, inwriting, on 17/08/1982. The first agreement was, interalia, to design, manufacture, test and effect supplies of equipment and materials for a computer based training simulatorwhile by the second agreement the respondent was to do thework of clearance and handling at Indian Port, transportationand handling at project site, storage, erection, testing and) commissioning and line tuning of the said training simulator at theappellant s super thermal power station at Korba.
( 3 ) THE terms of the contract between the parties were to begoverned not only by the formal agreements dated 17/08/1982 but also by the other contract documents which had preceded the aforesaid letters dated 14/02/1981 wherebythe contracts were awarded. One of the contract documents,inter alia, containing the terms of the contract was the"general Conditions of Contract" which were applicable to boththe agreements.
( 4 ) THE two formal agreements dated 17/08/1982entered into between the parties are identically worded. Article4. 1 of the said agreements dealt with the question of settlementof disputes and is as follows :
"it is specifically agreed by and between the parties thatall the differences or disputes arising out of thecontract or touching the subject matter of thecontract, shall be decided by process of settlementand Arbitration as specified in Clause 26. 0 and 27. 0,excluing 27. 6. 1 and 27. 6. 2, of the General Conditions of the Contract. "the caluses of the General Conditions of the Contract, to whichreference has been made by the learned counsel for the partiesduring the course of arguments, are as follows :"7. 2 The laws applicable to this Contract shall bethe laws in force in India. The Courts of Delhishall have exclusive jurisdiction in all mattersarising under this Contract. 27. 0 ARBITRATION27. 1. If any dispute or difference of any kindwhatsoever shall arise between the Owner and; thecontractor, arising out of the Contract for theperformance of the Works whether during the progress of the Works or after its completion orwhether before or after the termination, abandonment or breach of the Contract, it shall, in thefirst place, be referred to and settled by theengineer, who, within a period of thirty (30 days)after being requested by either party to do so, shallgive written notice of his decision to the Ownerand the Contractor. 27. 2 Save as hereinafter provided, such decisionin respect of every matter so referred shall be finaland binding upon the parties until the completionof the Works and shall forthwith be given effect toby the Contractor who shall proceed with theworks with all due diligence, whether he or theowner requires arbitration as hereinafter providedor not. 27. 3 If after the Engineer has given written noticeof his decision to the parties, no claim to arbitration has been communicated to him by either partywithin thirty (30) days from the receipt of suchnotice, the said decision shall become final andbinding on the parties. 27. 4 In the event of the Engineer failing to notifyhis decision as aforesaid within thirty (30) daysafter being requested as aforesaid, or in the eventof either the Owner or the Contractor being dissatisfied with any such decision, or within thirty (30) days after the expiry of the first mentionedperiod of thirty (30) days, as the case my be,either party may require that the matters in disputebe referred to arbitration as hereinafter
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