# HARMONY INNOVATION SHIPPING LTD v. GUPTA COAL INDIA LTD. &ANR - **Citation:** [2015] 2 S.C.R. 697 - **Court:** Supreme Court of India - **Decided:** 2015-03-10 - **Case number:** Civil Appeal No. 610 of2015 - **Bench:** Dipak Misra, P"Rafull~ C. Pant - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/harmony-innovation-shipping-ltd-v-gupta-coal-india-ltd-anr-30489 - **Pages:** 43 ## Headnote Arbitration and Conciliation Act, 1996: s.9 - International Commercial Arbitration - Arbitration agreement stated that in case of dispute, arbitration in London would apply; the contract would be governed by English law and arbitrators D would be members of London Arbitration Association - This showed that the juridical seat of arbitration would be London - In view of implied exclusion, the courts in India will not have jurisdiction. E Dismissing the appeal, the Court HELD: 1. There is no cavil over the principle stated in Bhatia International that Part I of the Act is applicable to arbitrations held outside India unless the parties have F either expressly or impliedly excluded the provisions of the Act. The stipulations in the present arbitration clause prescribe that if any dispute or difference arise under the charter, arbitration in London will apply; that the arbitrators are to be commercial men who are members G of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims procedure of the London Maritime Arbitration Association. There is H 697 HARMONY INNOVATION SHIPPING LTD. v. GUPTA 698 COAL INDIA LTD. no other provision in the agreement that any other law A would govern the arbitration clause. When the stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. The c;ommercial background, the context, B of the contract and the circumstances of the parties and in the background in which the contract was entered into, irresistibly lead in that direction. It is a proper clause or substantial clause and not a curial or a procedural C one by which the arbitration proceedings are to be conducted and hence, the seat of arbitration will be at London. [Paras 34, 41, 44, 46] [728-E; 736-B-C; 737-F; 739-C] D 2. The Division Bench of the High Court had allowed the petition on the foundation that the Bharat Aluminium Co. case would govern the field and, therefore, the court below had no jurisdiction. The said reason is not correct. But even applying the principles laid doll)ln in Bhatia E International and scanning the anatomy of the arbitration clause, the courts in India will not have jurisdiction as there is implied exclusion. Consequently, for different reasons, the conclusion arrived at by the High Court is upheld. [paras 48, 49] [739-E-F, G] F Bhatia International v. Bulk Trading S.A (2002) 4 SCC 105i 2002 (2) SCR 411 - relied on. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552: 2012 (12) SCR 327 - held inapplicable. Venture Global Engg. v. Satyam Computer Services Ltd. (2008) 4 SCC 190: 2008 (1) SCR 501; lndtel Technical Services (P) Ltd. v. WS. Atkins Rail Ltd. (2008) 10 SCC • G H 699 A B c D E F G H SUPREME COURT REPORTS [2015] 2 S.C.R. 308: 2008 (12) SCR 673; NTPC v. Singer Co. {1992) 3 SCC 551: 1992 (3) SCR 106; Citation lnfowares Ltd. v. Equinox Corp. (2009) 7 SCC 220: 2009 (6) SCR 737; Reliance Industries Limited and Another v. Union of India (2014) 7 SCC 603; Videocon Industries Ltd. v. Union oflndia (2011) 6 SCC 161: 2011 (8) SCR 569; Dozco India Private Ltd. v. Doosan lnfracore Company Ltd. (2011) 6SCC179: 2010 (12) SCR 259; Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305: 1997 (6) Suppl. SCR 186; Yograj Infrastructure Ltd. v. Ssang Yong Engg. and Construction Co. Ltd. (2011) 9 SCC 735: 2011 (14) SCR 301; Enercon (India) Ltd. v. Enercon GmbH (2014) 5 SCC 1: 2014 (2) SCR 855; A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem (1989) 2 SCC 163: 1989 (2) SCR 1; Rajasthan SEB v. Universal Petrol Chemicals Ltd. (2009) 3 SCC 107: 2009 (1) SCR 138; NTPC v. Singer Co. (1992) 3 sec 551: 1992 (3) SCR 106; Hardy Oil and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd. (2006) 1 Guj LR 658 - referred to. Les ## Text _Characters 0–39,960 of 74,754. This is a partial read: ask again with offset=39960 for what follows._ A B c [2015] 2 S.C.R. 697 HARMONY INNOVATION SHIPPING LTD. v. GUPTA COAL INDIA LTD. &ANR. (Civil Appeal No. 610 of2015) MARCH 10, 2015 [DIPAK MISRA AND P"RAFULL~ C. PANT, JJ.] Arbitration and Conciliation Act, 1996: s.9 - International Commercial Arbitration - Arbitration agreement stated that in case of dispute, arbitration in London would apply; the contract would be governed by English law and arbitrators D would be members of London Arbitration Association - This showed that the juridical seat of arbitration would be London - In view of implied exclusion, the courts in India will not have jurisdiction. E Dismissing the appeal, the Court HELD: 1. There is no cavil over the principle stated in Bhatia International that Part I of the Act is applicable to arbitrations held outside India unless the parties have F either expressly or impliedly excluded the provisions of the Act. The stipulations in the present arbitration clause prescribe that if any dispute or difference arise under the charter, arbitration in London will apply; that the arbitrators are to be commercial men who are members G of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims procedure of the London Maritime Arbitration Association. There is H 697 HARMONY INNOVATION SHIPPING LTD. v. GUPTA 698 COAL INDIA LTD. no other provision in the agreement that any other law A would govern the arbitration clause. When the stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. The c;ommercial background, the context, B of the contract and the circumstances of the parties and in the background in which the contract was entered into, irresistibly lead in that direction. It is a proper clause or substantial clause and not a curial or a procedural C one by which the arbitration proceedings are to be conducted and hence, the seat of arbitration will be at London. [Paras 34, 41, 44, 46] [728-E; 736-B-C; 737-F; 739-C] D 2. The Division Bench of the High Court had allowed the petition on the foundation that the Bharat Aluminium Co. case would govern the field and, therefore, the court below had no jurisdiction. The said reason is not correct. But even applying the principles laid doll)ln in Bhatia E International and scanning the anatomy of the arbitration clause, the courts in India will not have jurisdiction as there is implied exclusion. Consequently, for different reasons, the conclusion arrived at by the High Court is upheld. [paras 48, 49] [739-E-F, G] F Bhatia International v. Bulk Trading S.A (2002) 4 SCC 105i 2002 (2) SCR 411 - relied on. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552: 2012 (12) SCR 327 - held inapplicable. Venture Global Engg. v. Satyam Computer Services Ltd. (2008) 4 SCC 190: 2008 (1) SCR 501; lndtel Technical Services (P) Ltd. v. WS. Atkins Rail Ltd. (2008) 10 SCC • G H 699 A B c D E F G H SUPREME COURT REPORTS [2015] 2 S.C.R. 308: 2008 (12) SCR 673; NTPC v. Singer Co. {1992) 3 SCC 551: 1992 (3) SCR 106; Citation lnfowares Ltd. v. Equinox Corp. (2009) 7 SCC 220: 2009 (6) SCR 737; Reliance Industries Limited and Another v. Union of India (2014) 7 SCC 603; Videocon Industries Ltd. v. Union oflndia (2011) 6 SCC 161: 2011 (8) SCR 569; Dozco India Private Ltd. v. Doosan lnfracore Company Ltd. (2011) 6SCC179: 2010 (12) SCR 259; Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305: 1997 (6) Suppl. SCR 186; Yograj Infrastructure Ltd. v. Ssang Yong Engg. and Construction Co. Ltd. (2011) 9 SCC 735: 2011 (14) SCR 301; Enercon (India) Ltd. v. Enercon GmbH (2014) 5 SCC 1: 2014 (2) SCR 855; A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem (1989) 2 SCC 163: 1989 (2) SCR 1; Rajasthan SEB v. Universal Petrol Chemicals Ltd. (2009) 3 SCC 107: 2009 (1) SCR 138; NTPC v. Singer Co. (1992) 3 sec 551: 1992 (3) SCR 106; Hardy Oil and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd. (2006) 1 Guj LR 658 - referred to. Lesotho Highlands Development Authority v. lmpregi/o SPA (2005) 3·wLR 129; Sulamerica Cia Nacional de Seguros SA v. Enesa Engelharia SA- Enesa (2013) 1 WLR 102; Mitsubishi Heavy Industries Ltd. v. Gulf Bank (1997) 1 Lloyd's Rep. 343; Cargill International S.A. v. Bangladesh Sugar & Food Industries Corp. (1998) 1W.L.R.461 CA- referred to. Case law reference 2012 (12) SCR 327 2002 (2) SCR 411 referred to Para 1 referred to Para 5 HARMONY INNOVATION SHIPPING LTD. v. GUPTA 700 COAL INDIA LTD. 2008 (1) SCR 501 referred to Para6 A 2008 (12) SCR 673 referred to Para 11 1992 (3) SCR 106 referred to Para 11 2009 (6) SCR 737 referred to Para 12 B (2014) 1 sec 603 referred to Para 14 2011 (8 ) SCR 569 referred to Para 21 2010 (12) SCR 259 referred to Para 25 c 1997 (6) Suppl. SCR186 referred to Para 25 2011 (14) SCR 301 referred to Para 25 D 2014 (2) SCR 855 referred to Para 25 1989 (2) SCR 1 referred to Para 27 2009 (1) SCR 138 referred to Para 33 E 1992 (3) SCR 106 referred to Para 33 (2006) 1 Guj LR 658 referred to Para 40 CIVIL APPELLATE.JURISDICTION: Civil Appeal No. 610 of2015 F From the Judgment and Order dated 27.11.2014 of the High · Court of Kerala at Emakulam in OP (C) No. 2612 of 2014 K. V. Vishwanathan, Ashwin Shankar, Abhishek Kaushik, G Sameer Dawar, Abhinav Mukerji for the Appellant. V. Giri, Raghenth Basant, Hardeep Singh, Aditi Mishra, Liz Mathew for the Respondents. H 701 SUPREME COURT REPORTS [2015] 2 S.C.R. A The Judgment of the Court was delivered by: DIPAK MISRA, J. 1. The issue that has emanated for consideration in this appeal is whether in the obtaining factual matrix, especially regard being had to the nature of the B arbitration clause, the High Court is justified in setting aside the order passed by the learned Additional District Judge, Ernakulam on 25.9.2014 in I.A. No. 4345 of 2014 in O.P. (ARB) No. 802/2014 directing the first respondenttherein to furnish security for US$ 11,15,400 or its equivalent (approximate) C Indian Rupees 6,60,00,000/- or to show cause on or before 01.10.2014, and as an interim measure conditionally attaching the cargo belonging to the first respondent herein, while dealing with an application moved under Section 9 of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act"), on the D foundation that Section 9 of the Act is limited to the applications to arbitration that takes place in India and has no applicability fo arbitration which takes place outside India in view of the pronouncement in Bharat Aluminium Co. v. Kaiser E Aluminium Technical Services lnc.1 inasmuch as clause 5 of the contract which is the arbitration clause clearly spells out that the contract is to be governed and construed according to English law and if the dispute of the claim does not exceed USO 50,000, the arbitration should be conducted in F accordance with small claims procedure of the London Maritime Arbitration Association. 2. Regard being had to the lis in question, suffice it to state that an agreement was entered into between the parties on G 20.10.2010 in respect of 24 voyages of coal shipment belonging to the appellant, the first respondent before the High <;:ourt, from Indonesia to India. The respondent no. 1 herein, Gupta Coal India Ltd., undertook only 15 voyages and that resulted in disputes which ultimately stood referred to H 1. c2012) 9 sec 552 HARMONY INNOVATION SHIPPING LTD. v. GUPTA 702 COAL INDIA LTD. [DIPAKMISRA, J.) . arbitration. Be it noted, an addendum to contract was executed A as regards the remaining voyages on 3.4.2013 when disputes arose in respect of the principal/main agreement. As the facts would undrape arbitration proceedings were initiated and eventually an award was passed. B 3. After the award came into existence, the present appellant filed an application under Section 9 before the District Court, Ernakulam for its enforcement under Sections 9/47 and 49 of the Act. As the factual narration would further uncurtain in respect of the addendum to contract, when disputes arose C relating to the same, arbitration proceedings were initiated and at that juncture, the appellant moved the learned 2nd Additional District Court, Ernakulam under Section 9 of the Act seeking attachment of the cargos as an interim relief and D the learned Additional District Judge, as has been stated earlier, issued conditional order of attachment. 4. The order passed by the learned Additional District Judge, was assailed before the High Court in a Writ Petition, O.P.(C) E No. 2612 of 2014 raising a singular contention that the impugned order therein was absolutely without jurisdiction and hence, unsustainable in law. 5. A counter affidavit was filed contending, inter alia, that the application before the learned Additional District Judge was F maintainable inasmuch as the contract between the parties was entered into prior to the decision in Bharat Aluminium Co. (supra) and, the,refore;the principle laid down in the said decision was not attracted to the facts of the case, and in fact, G it was governed by the principles stated in Bhatia International v. Bulk Trading 5.A2· 2. (~002i 4 sec 105 H· 703 SUPREME COURT REPORTS [2015] 2 S.C.R. A 6. The High Court, after hearing the learned counsel for the parties, referred to main agreement, Exhibit P-1, the addendum, Exhibit P-2, and the arbitration clause in the main agreement and considered the decisions in Bhatia International (supra) and Venture Global Engg. v. Satyam B Computer Services Ltd. 3• some decisions of the High Court, reproduced a passage from Russell on Arbitration and eventually came to hold as follows: c D E F G "The contention that since Ext.P1 was entered into before the judgment in Bharat Aluminium Co. 's case and therefore the principles laid down in the said decision is not applicable to the facts of the case cannot be countenanced. The law laid down by the Supreme Court in BharatAluminium Co.'s case is declaratory in nature and, therefore, the first respondent cannot be heard to say that he is not bound by the same and that the said principle cannot be applied to the case on hand. In the case of a declaration, it is supposed to have been . the law always and one cannot be heard to say that it has only prospective effect. It is deemed to have been the law at all times. If that be so, the petition before the court below is not maintainable and is only to be dismissed." 7. At the very outset, it is necessary to clear the maze as regards the understanding of the ratio in BharatAluminium Co. (supra) by the High Court In the said case, the Constitution Bench has clearly ruled thus: "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 H 3. (2ooa) 4 sec 190 HARMONY INNOVATION SHIPPING LTD. v. GUPTA COAL !NOIA LTD. [DIPAK MISRA, J.] well as by this Courton numerous occasions. In fact, the judgment in Venture Global Engg. has been rendered on 10-1-2008 in terms of the ratio of the decision in Bhatia lntemationat 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." 704 A B The aforesaid judgment by the Constitution Bench was decided on September 6, 2012. In the instant case, the arbitration agreement was executed prior to that date and the C addendum, as mentioned earlier, came into existence afterwards. Therefore, there can be no scintilla of doubtthat the authority in Bharat Aluminium Co. case would not be applicable for determination of the controversy in hand. In fact, 0 the pronouncement in Bhatia International (supra) would be applicable to the facts of the present case inasmuch as there is nothing in the add~ndum to suggest any arbitration and, in fact, it is controlled and governed by the conditions postulated in the principal contract. We shall advert to this aspect slightly E more specifically at a later stage. 8. Keeping the aforesaid in view, it is necessary to keenly understand the decision in Bhatia International (supra). In the said case, the agreement entered into between the parties, F contained an arbitration clause which provided that arbitration was to be as per Rules of International Chambers of Commerce (for short, "the ICC). The parties had agreed that the arbitration was to be held in Paris, France. The first respondent filed an application under Section 9 of the Act G before the learned Additional District Judge, Indore, M.P. with an interim prayer. A plea was raised by the appellant that the Indore Court had no jurisdiction and application was not maintainable. The said stand was repelled by the learned H 705 SUPREME COURT REPORTS [2015] 2 S.C.R. A Additional District Judge, which found favour with the High Court. Before this Court, it was urged on behalf of the appellant that Part I of the Act only applies to arbitration where the place of arbitration is in India, but if the place of arbitration is not in India, then Part ll of the Act would apply. On behalf of the B respondent therein, it was urged that unless the parties, by their agreement either expressly or impliedly exclude its provisions, Part I would also apply to all international commercial arbitrations including those that take place in India. C The three-Judge Bench came to hold thus:- D E F G H "To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration 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 derogable provisions of Part I. In cases of international commercial arbitrations 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." [Emphasis supplied] After the said conclusion was recorded, the stand of the learned senior counsel for the appellant was put thus:- "Faced with this situation Mr Sen submits that, in this case the parties had agreed that the arbitration be as per the Rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view, in such cases the question would be whether Section 9 gets excluded by th(;) ICC Rules of Arbitration. Article 23 ofthe HARMONY INNOVATION SHIPPING LTD. v. GUPTA 706 COAL INDIA LTD. [DIPAK MISRA, J.] ICC Rules reads as follows:- Conservatory and interim measures 1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, theArbitral Tribunal may, at the request of a party, order any interim. or conservatory mea"sure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an award, as theArbitral Tribunal considers appropriate. 2. Before the.file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a 11Yaiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof." • After so stating, the Court referred to Article 23 of the ICC Rules and interpreted thus:- "ThusArticle 23 of the ICC Rules permits parties to apply to a competent judici~I authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the said A B c D E F G H 707 SUPREME COURT REPORTS [2015] 2 S.C.R. A Act." 9. The decision in Bhatia International (supra) was followed in Venture Global Engg. (supra). The Court scanned the ultimate conclusion recorded in Bhatia International (supra) B and in that context, referred to various paragraphs and came to hold as follows:- c D E F G H "32. The learn.ed Senior Counsel for the respondent based on para 26 submitted that in the case offoreign award which was passed outside India is not enforceable in India by invoking the provisions of the Act or CPC. However, after critical analysis of para 26, we are unable to accept the argument of the learned Senior Counsel for the respondent. Paras 26 and 27 start by dealing with the arguments of Mr Sen who argued that Part I is not applicable to foreign awards. It is only in the sentence starting at the bottom of para 26 that the phrase "it must immediately be clarified" that the finding of the Court is rendered. That finding is to the effect that an express or implied agreement of parties can exclude the applicability of Part I. The finding specifically states: "But if not so excluded, the provisions of Part I will also apply to all 'foreign awards'." This exception which is carved out, based on agreement of the parties, in para 21 (placita e to f) is extracted below: (Bhatia lntemational case sec p. 119e to f) "21 . ... By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention HARMONY INNOVATION SHIPPING LTD. v. GUPTA 708 COAL INDIPC-tc""IB. [DlPAK MISRA, J.] of the legislature appears to be to ally (sic allow) parties to provide by agreerr.ent that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied." 33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgmentdebtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgment-debtor cannot be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India includes - (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d).in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country for enforcement." After so holding the Court dealt with the contentions of the learned senior counsel who highlighted the concept of 'transfer' of shares and the procedure involved therein under A B c D E F G H 709 SUPREME COURT REPORTS [2015] 2 S.C.R. A the Indian Companies Act, 1956 and the impact of Foreign Exchange Management Act, 1999 and adverted to the impact . and effect of the legal and regulatory scrutiny under both the Act and accepted the submission. The Court, thereafter, scanned the shareholders agreement and eventually came to B hold that in terms of the decision in Bhatia International (supra) , Part I of the Act is applicable to the award that was called in question in the said case, even though it was a foreign award. C 10. The aforesaid decision clearly lays down that it would be open to the parties to exclude the application of the provision of Part I by express or implied agreement. Unless there is express or implied exclusion, the whole of Part I would apply. 0 The Court, as stated earlier, was dealing with shareholders agreement between the parties. Sections 11.05 (b) and (c) of the shareholders agreement between the parties read as follows:- E F G "(b) This agreement shall be construed in accordance with and governed by the laws of the State of Michigan, United States, without regard to the conflicts of law rules of such jurisdiction. Disputes between the parties that cannot be resolved via negotiations shall be submitted for final, binding arbitration to the London Court of Arbitration. (c) Notwithst