IN THE HIGH COURT OF KERALA AT ERNAKULAM
A. Muhamed Mustaque, J.
Chi Commodities Handlers Inc. - Appellant
Vs.
Ranjith Lal - Respondent
O.P.(C). Nos. 821/2015 (O), 903, 904 and 905/2015
Decided On : 06-10-2015
Arbitration and Conciliation Act 1996 - Section 2(7) - Arbitration Agreement - Arbitral Award - Domestic Award - Held, Domestic Award necessarily implies that the Arbitration agreement to be governed by the domestic law - Any Arbitration agreement to be governed by a Foreign law has to be treated as a Foreign Award - Award made in accordance with the Part I of the Arbitration Act is Domestic Award
A. Muhamed Mustaque, J.
1. These original petitions are arising from the orders passed by the District Court, Kollam rejecting preliminary objection raised by the petitioners on the maintainability of Original Petitions (Arbitration) filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the "Arbitration Act, 1996"). Since common questions of law are involved in all these original petitions, the same are being disposed of by this common judgment.
2. The petitioners in all these original petitions are one and the same, namely, a Canadian entity, which has raised a claim against the respondents invoking Arbitration clause in accordance with the Arbitration procedure of the Association of Food Industries (Inc.) (for short, "AFI"). The relevant clause of Arbitration is as follows:
"Any controversy or claim arising out of or relating to this contract or breach thereof shall be settled by Arbitration in New York, NY, by the Association of food industries in Inc in accordance with its rules and judgment."
Accordingly, an Award has been passed in the matter by the Arbitrators of AFI.
3. The respondents, who are based at Kollam, filed the original petitions under Section 34 of the Arbitration Act, 1996 to set aside the Award before the District Court, Kollam. The petitioner raised preliminary objection against maintainability of the original petitions. According to the petitioner, the Award in question is a Foreign Award and Part-I of the Arbitration Act, 1996 would not apply.
4. The learned Additional District Judge, following the judgment of this Court in International Nut Alliance LLC v. Binu John [2014 (3) KLT 355] took the view that maintainability cannot be decided by piece meal adjudication without affording parties an opportunity to adduce evidence. Therefore, the issue regarding maintainability has been relegated for a decision along with final determination of the original petitions.
5. Heard Shri T.R. Aswas for the original petitioner and Shri Gopikrishnan Nambiar for the respondents.
6. Part-I of Arbitration Act, 1996 would apply only in respect of Domestic Award. Part-II of the Act provides enforcement of certain Foreign Awards. In the light of the order passed by the Additional District Judge, the first question that arises is whether the issue relating to maintainability can be decided at the threshold without recourse to the evidence. Second question that arises for consideration is whether the Award in question is a Foreign Award or not.
7. In regard to the first question, this Court is of the view that the matter does not require a probe by evidence. It is a purely construction of the Arbitration clause in relation to the contract. The court below cannot enlarge the scope of the Arbitration agreement by allowing parties to adduce evidence. When an Award is called in question, it has to be decided with reference to the law that would apply to the Arbitration agreement. The Arbitration agreement may consist of, law in relation to Arbitration (governing law), law in relation to procedure of Arbitration (curial law) and the law in relation to the contract (substantial law).
8. The Arbitration agreement as afore-noted clearly indicates the law relating to Arbitration and the procedure of the Arbitration. It is categorically stated in the agreement that the Arbitration is governed by the law of New York and the procedure in relation to rules and regulations of the Arbitration are in accordance with the AFI. It does not state anything about the governing law of the contract. The question is, even if its governing law of contract is Indian law, would it be suffice to hold, to treat it as a Domestic Award governed by Part-I of Arbitration Act, 1996.
9. In Bharat Aluminium Company v. Kaiser Aluminium Technical Service (INC) [(2012) 9 SCC 552], it was held by the Hon'ble Supreme Court as follows:
"In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted
International Nut Alliance LLC v. Binu John [2014 (3) KLT 355]
Bharat Aluminium Company v. Kaiser Aluminium Technical Service (INC) [(2012) 9 SCC 552]
Videocon Industries Ltd. v. Union of India and another [(2011) 6 SCC 161]
Sakuma Exporters Limited v. Louis Dreyfus Commodities Suisse SA [(2015) 5 SCC 656]
Reliance Industries Limited and Another v. Union of India [(2014) 7 SCC 603]
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