# NOY VALLESINA ENGINEERING SpA, (NOW KNOWN AS NOY AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED & ORS

- **Citation:** [2020] 12 S.C.R. 1019
- **Court:** Supreme Court of India
- **Decided:** 2020-11-26
- **Case number:** Civil Appeal No. 8607 of 2010
- **Bench:** Indira Banerjee, S. Ravindra Bhat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/noy-vallesina-engineering-spa-now-known-as-noy-ambiente-s-p-a-v-jindal-drugs-34505
- **Pages:** 38

## Headnote

Arbitration and Conciliation Act, 1996:
s.34 - Petition under - Challenging foreign award -
Maintainability of - Held: Seat of arbitration in the present case
was in London under the aegis of ICC - Challenge to such award
u/s. 34 is not maintainable.
s.50 - Appeal against orders passed in arbitration proceedings
- Maintainability - Held: Section 50 alone provides for an appeal
in all arbitration cases of enforcement of foreign awards - Letters
Patent Appeals against such orders is not maintainable.
Allowing the appeal, the Court
HELD: 1. Having regard to the precedential unanimity, so
to say, about the manner of applicability of *BALCO case in
respect of agreements entered into and awards rendered earlier,
with respect to the law of the seat of arbitration (or the curial law)
excluding applicability of Part I of the Arbitration and Conciliation
Act, 1996 and the unambiguous intention of the parties in the
present case (expressed in Clause 12.4.2 of the Contract) that
the seat of arbitration was London, where the ICC arbitration
proceedings were in fact held, and the awards rendered, this court
is of the opinion that the impugned judgment cannot be sustained.
[Para 23][1052-D-F]
*Bharat Aluminium Company vs Kaiser Aluminium
Technical Services Inc (2012) 9 SCC 552 : [2012] 12
SCR 327; Venture Global Engineering v. Satyam
Computer Services Ltd. & Anr. (2008) 4 SCC 190 :
[2008] 1 SCR 501 - followed.
[2020] 12 S.C.R. 1019
1019
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Roger Shashoua v. Mukesh Sharma (2017) 14 SCC 722
: [2017] 7 SCR 442; IMAX Corporation v. E-City
Entertainment (India) (P.) Ltd. (2017) 5 SCC 331 :
[2017] 4 SCR 833; Government of India v. Vedanta Ltd
(2020) SCC Online (SC) 749; BGS SOMA JV v.
National Hydro Electric Power Corporation (2020) 4
SCC 234 - relied on.
Bhatia International v. Bulk Trading S. A. & Anr. (2002)
4 SCC 105 : [2002] 2 SCR 411; Union of India v.
Reliance Industries (2015) 10 SCC 213 : [2015] 10
SCR 85; Harmony Innovation Shipping Ltd v. Gupta
Goal India Ltd. 2015 (9) SCC 172: [2015] 2 SCR 697
- referred to.
2.1 The decision in **Fuerst Day Lawson unambiguously
ruled out the maintainability of any appeal against an order granting
enforcement of a foreign arbitration award. In the present case,
both the partial and final awards are foreign awards. Therefore,
the provisions of Sections 47/48 were correctly invoked by the
appellant for enforcement of the awards (through Application No
156/2005). The respondent objected to the enforcement
proceedings, in accordance with grounds articulated in Part II of
the Act. A single judge substantially upheld the award, and
proceeded to its enforcement, by a judgment dated 05.06.2006,
at the same time rejecting the challenge to enforcement laid out
by the respondent. Both parties appealed to the Division Bench;
the respondent on the challenge to the order rejecting its objection
to enforcement (Appeal No. 492/2006), and the appellant as to
that part of the order of the Single Judge, refusing to enforce a
part of the award (Appeal. No. 740/2006). [Para 24][1052-G; 1053A-B]
2.2. In all arbitration cases of enforcement of foreign awards,
it is Section 50 alone that provides an appeal. Therefore, the
respondent's appeal to the Division Bench, (Appeal No. 492/
2006) is not maintainable. However, the appellant's appeal
(Appeal. No. 740/2006), against the order of the Single Judge (to
the extent it refuses enforcement) is maintainable. [Para 25][1055F-G]
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2.3 In view of the finding that such an appeal (against an
order of enforcement) is untenable by reason of Section 50, the
merits of the respondent's objections to the Single Judge's order,
are open for it to be canvassed in appropriate proceedings. Such
proceedings cannot also be a resort to any remedy under the
Code of Civil Procedure. In the event the respondent chooses
to avail of such remedy, the question of limitation is left open, as
this court is conscious of the fact that

## Text

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1019
NOY VALLESINA ENGINEERING SpA,
(NOW KNOWN AS NOY AMBIENTE S.P.A.)
v.
JINDAL DRUGS LIMITED & ORS.
(Civil Appeal No. 8607 of 2010)
NOVEMBER 26, 2020
[INDIRA BANERJEE AND S. RAVINDRA BHAT, JJ.]
Arbitration and Conciliation Act, 1996:
s.34 - Petition under - Challenging foreign award -
Maintainability of - Held: Seat of arbitration in the present case
was in London under the aegis of ICC - Challenge to such award
u/s. 34 is not maintainable.
s.50 - Appeal against orders passed in arbitration proceedings
- Maintainability - Held: Section 50 alone provides for an appeal
in all arbitration cases of enforcement of foreign awards - Letters
Patent Appeals against such orders is not maintainable.
Allowing the appeal, the Court
HELD: 1. Having regard to the precedential unanimity, so
to say, about the manner of applicability of *BALCO case in
respect of agreements entered into and awards rendered earlier,
with respect to the law of the seat of arbitration (or the curial law)
excluding applicability of Part I of the Arbitration and Conciliation
Act, 1996 and the unambiguous intention of the parties in the
present case (expressed in Clause 12.4.2 of the Contract) that
the seat of arbitration was London, where the ICC arbitration
proceedings were in fact held, and the awards rendered, this court
is of the opinion that the impugned judgment cannot be sustained.
[Para 23][1052-D-F]
*Bharat Aluminium Company vs Kaiser Aluminium
Technical Services Inc (2012) 9 SCC 552 : [2012] 12
SCR 327; Venture Global Engineering v. Satyam
Computer Services Ltd. & Anr. (2008) 4 SCC 190 :
[2008] 1 SCR 501 - followed.
[2020] 12 S.C.R. 1019
1019
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SUPREME COURT REPORTS
[2020] 12 S.C.R.
Roger Shashoua v. Mukesh Sharma (2017) 14 SCC 722
: [2017] 7 SCR 442; IMAX Corporation v. E-City
Entertainment (India) (P.) Ltd. (2017) 5 SCC 331 :
[2017] 4 SCR 833; Government of India v. Vedanta Ltd
(2020) SCC Online (SC) 749; BGS SOMA JV v.
National Hydro Electric Power Corporation (2020) 4
SCC 234 - relied on.
Bhatia International v. Bulk Trading S. A. & Anr. (2002)
4 SCC 105 : [2002] 2 SCR 411; Union of India v.
Reliance Industries (2015) 10 SCC 213 : [2015] 10
SCR 85; Harmony Innovation Shipping Ltd v. Gupta
Goal India Ltd. 2015 (9) SCC 172: [2015] 2 SCR 697
- referred to.
2.1 The decision in **Fuerst Day Lawson unambiguously
ruled out the maintainability of any appeal against an order granting
enforcement of a foreign arbitration award. In the present case,
both the partial and final awards are foreign awards. Therefore,
the provisions of Sections 47/48 were correctly invoked by the
appellant for enforcement of the awards (through Application No
156/2005). The respondent objected to the enforcement
proceedings, in accordance with grounds articulated in Part II of
the Act. A single judge substantially upheld the award, and
proceeded to its enforcement, by a judgment dated 05.06.2006,
at the same time rejecting the challenge to enforcement laid out
by the respondent. Both parties appealed to the Division Bench;
the respondent on the challenge to the order rejecting its objection
to enforcement (Appeal No. 492/2006), and the appellant as to
that part of the order of the Single Judge, refusing to enforce a
part of the award (Appeal. No. 740/2006). [Para 24][1052-G; 1053A-B]
2.2. In all arbitration cases of enforcement of foreign awards,
it is Section 50 alone that provides an appeal. Therefore, the
respondent's appeal to the Division Bench, (Appeal No. 492/
2006) is not maintainable. However, the appellant's appeal
(Appeal. No. 740/2006), against the order of the Single Judge (to
the extent it refuses enforcement) is maintainable. [Para 25][1055F-G]
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2.3 In view of the finding that such an appeal (against an
order of enforcement) is untenable by reason of Section 50, the
merits of the respondent's objections to the Single Judge's order,
are open for it to be canvassed in appropriate proceedings. Such
proceedings cannot also be a resort to any remedy under the
Code of Civil Procedure. In the event the respondent chooses
to avail of such remedy, the question of limitation is left open, as
this court is conscious of the fact that Fuerst Day Lawson is a
decision rendered over 10 years ago; it settled the law decisively
and has been followed in later judgments. It cannot be said that
the respondent was ignorant of the law. [Para 26][1055-H; 1056A-B]
**Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. (2011)
8 SCC 333 : [2011] 11 SCR 1; Union of India v Simplex
Infrastructures Ltd. (2017) 14 SCC 225; Kandla Export
Corpn. v. OCI Corpn (2018) 14 SCC 715 : [2018] 1
SCR 915 - relied on.
Case Law Reference
[2015] 10 SCR 85
referred to
Para 12
[2015] 2 SCR 697
referred to
Para 12
[2002] 2 SCR 411
referred to
Para 17
[2008] 1 SCR 501
followed
Para 17
[2017] 7 SCR 442
relied on
Para 19
[2017] 4 SCR 833
relied on
Para 20
(2020) 4 SCC 234
relied on
Para 20
[2012] 12 SCR 327
followed
Para 23
[2011] 11 SCR 1
relied on
Para 25
(2017) 14 SCC 225
relied on
Para 25
[2018] 1 SCR 915
relied on
Para 25
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8607
of 2010.
From the Judgment and Order dated 28.04.2008 of the High Court
of Bombay in Appeal No. 519 of 2002.
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED
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Jayadeep Gupta, Sr.Adv. L.K. Bhushan, Anirudh Arun kumar,
G.C.Shyam Sundar, M/S. Dua Associates, M/s D.S.K. Legal, Advs. for
the appearing parties.
The Judgment of the Court was delivered by
S. RAVINDRA BHAT, J.
1. The appellant, which was granted special leave, challenges a
judgment of the Bombay High Court1. It urges that the impugned judgment
is erroneous because it concludes that proceedings under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereafter "the Act") can be
maintained to challenge a foreign award, defined as one, under that
enactment.
The facts
2. The appellant company (hereafter "NV Engineering" or "the
appellant") was at the relevant time, incorporated under Italian law and
involved in the setting-up and construction of plants for production of
synthetic fibers, polymers and ascorbic acid. The respondent (hereafter
"Jindal") is a public limited company incorporated under relevant Indian
law. In 1994, Jindal negotiated with a company - Engineering Chur AG
of Sagenstrasse 97, 7001 Chur, Switzerland (hereafter,'Enco') and, on
30.01.1995 entered into four related agreements with Enco to set up an
ascorbic acid plant in India. These were: (i) Engineering Contract for
Ascorbic for Acid Plant (ECAAP, or "plant contract"); (ii) Supply contract
for Ascorbic Acid plant (SCAAP or "supply contract"); (iii) Service
agreement for Ascorbic Acid plant (SAAAP "service contract"); and
(iv) License agreement for Ascorbic acid plant (LAAAP "license
contract").
3. Under the plant contract, Enco agreed to provide Jindal with
technical information and basic engineering documentation for the
construction, commission, operation and maintenance of the Ascorbic
Acid Plant ("the plant"). In consideration of Enco's obligations, Jindal
was to pay a total fee of Swiss Francs 86,00,000/- in the manner provided
in the Agreement. ECAAP as well as the other three agreements had
an arbitration clause. In March 1995, with the consent of the respondent,
Enco assigned ECAAP to NV Engineering. All the obligations of Enco
towards Jindal were taken over by NV Engineering.
1 Dated 28.4.2008 in Appeal No. 519/2002
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4. Disputes arose between Jindal and NV Engineering. The latter
terminated the agreement and claimed damages. On 31.10.1996, Jindal
filed a request for arbitration under the ECAAP, i.e. the plant contract,
before the International Court of Arbitration (ICC), Paris. The appellant
filed its reply to Jindal's claim and also made a counter claim. Jindal
appointed Mr. Desai as its nominee on the arbitral tribunal. NV
Engineering nominated Prof. ACC Alberto Santa Maria as its nominee.
The appointment of Mr. Desai and Prof. ACC Alberto Santa Maria as
Arbitrators was confirmed by the ICC. Mr. Richard Fernyhough Q.C.
was appointed as Chairman of the Arbitral Tribunal.
5. After considering the claims and counter claims, the tribunal
made a partial award on 01.02.2000; by that award, Jindal's claims were
rejected. NV Engineering was awarded SFr.44,33,416 (Swiss Francs)
towards its counterclaims under the ECAAP. The tribunal then called
upon the parties to present written representations on interest and costs
in terms of Article 20 of the ICC Rules of Arbitration to enable it to
frame the final award.
6. On 20.2.2000 Jindal filed a petition2 before the Bombay High
Court under Section 34 of the Act challenging the partial award. The
petition was admitted for final hearing on 01.03.2000 and notice was
issued to the respondents (including the ICC and the tribunal). An interim
injunction restraining the said respondents "from receiving any further
submissions, and/or passing any further direction and/or Ruling
and/or Award in the arbitration proceedings...." was issued. This
order was continued from time to time till the petition was decided. The
ICC tribunal in the meanwhile was of the view that the interim order
passed by the high court was not binding on it and consequently, proceeded
further. NV Engineering filed written submissions on interest and cost
on 14.03.2001. Jindal, however, notified the tribunal that it did not intend
to make any submission on the issue of interest and cost. Mr. Desai (the
respondent's nominee) indicated that he was unable to continue on the
tribunal due to the interim order passed by the court. Resultantly the
ICC appointed Mr. Ashok Sancheti as a replacement co-arbitrator in
place of Mr. Desai, and the tribunal made its final Award on 22.10.2001.
When the final award was made, Jindal's challenge to the partial award,
and the interim application3 were both pending in the High Court.
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
2 Arbitration petition No. 49/2000.
3 No. 98/2000, under Section 9 of the Act.
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7. The petition (under Section 34) challenging the partial award
was decided by the High Court by an order of a Single Judge dated
6.2.20024, which held that the since the partial award was a foreign
award, a challenge through a petition was not maintainable under Section
34 of the Act. Jindal preferred an appeal against that order before the
Division Bench5 (hereafter "Jindal's challenge appeal"). During the
pendency of the appeal, NV Engineering had applied for enforcement
of the two awards, i.e. the partial and final awards, under Sections 47
and 48 of the Act, in the chapter relating to foreign awards. This petition
was allowed and Jindal's objections against the two awards' enforceability
were overruled. The single judge who decided the petition held, in a
judgment (hereafter referred to as "the enforcement order")6 that the
two awards "at Exh. A & B are enforceable, save and except that
part of the award at Exh. A which directs payment of Swiss
Fr.1,453,316" by Jindal to NV Engineering. Jindal preferred an appeal
(hereafter "Jindal's enforcement appeal") and NV Engineering filed a
cross appeal7.
8. By the impugned judgment, even as the later two appeals, which
directly dealt with the same subject matter (enforcement of a foreign
award were pending), the Division Bench decided Jindal's challenge
appeal preferred in 2002, and set aside the single judge's order (which
had ruled that a petition under Section 34 was not maintainable). The
Division Bench relied on the judgments of this court, i.e. Bhatia
International v. Bulk Trading S. A. & Anr8 and Venture Global
Engineering v. Satyam Computer Services Ltd. & Anr9 to hold that
proceedings under Section 34 of the Act could be validly maintained to
challenge a foreign award.
The parties' contentions
9. Appearing for the appellant, NV Engineering, Mr. Joydeep
Gupta, learned senior counsel, urged that the impugned judgment is
4 Dated 06.02.2002, which is now reported as Jindal Drugs Ltd v Noy Vallesina 2002
(2) Mah. LJ 820.
5 Appeal No. 519/2002.
6 Noy Vallesina v Jindal Drugs Ltd 2006 (3) Arb.LR 510 (Bom). The enforcement
proceeding, under Sections 47/48 were registered as Arb. Petition No. 156/2005. The
decision was rendered on 05.06.2006.
7 Jindal's appeal was Appeal No. 492/2006; NV Engineering's appeal was Appeal. No.
740/2006
8 (2002) 4 SCC 105
9 2008 (4) SCC 190
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unsupportable in law because a foreign award cannot be challenged
under Section 34 of the Act. It was urged that the three-judge decision
in Bhatia International10 and the subsequent holding in Venture Global11
were both held to be incorrect in the larger, five judges ruling in Bharat
Aluminium Company vs Kaiser Aluminium Technical Services Inc12
("BALCO" hereafter). Learned counsel submitted that even the caveat
in BALCO that a class of foreign awards made prior to its pronouncement
cannot aid Jindal's essential argument with respect to maintainability of
a challenge under Section 34 and that such challenge under Part I is
untenable.
10. Mr. Gupta relied on BALCO extensively in support of his
argument that the foreign awards in this case, having been rendered
outside India under the aegis of the ICC cannot be challenged merely
because a condition in the underlying contract says that the law governing
the agreement, would be Indian law. The following discussion in BALCO
was pressed into service:
"117. It would, therefore, follow that if the arbitration
agreement is found or held to provide for a seat/place of
arbitration outside India, then the provision that the
Arbitration Act, 1996 would govern the arbitration
proceedings, would not make Part I of the Arbitration Act,
1996 applicable or enable the Indian courts to exercise
supervisory jurisdiction over the arbitration or the award. It
would only mean that the parties have contractually imported
from the Arbitration Act, 1996, those provisions which are
concerned with the internal conduct of their arbitration and
which are not inconsistent with the mandatory provisions of
the English procedural law/curial law. This necessarily follows
from the fact that Part I applies only to arbitrations having
their seat/place in India.
******
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 ********
123. Thus, it is clear that the regulation of conduct of
arbitration and challenge to an award would have to be done
by the courts of the country in which the arbitration is being
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
10 Supra n. 8
11 Supra n. 9
12 2012 (9) SCC 552
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conducted. Such a court is then the supervisory court
possessed of the power to annul the award. This is in keeping
with the scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well as
the UNCITRAL Model Law. It also recognises the territorial
principle which gives effect to the sovereign right of a country
to regulate, through its national courts, an adjudicatory duty
being performed in its own country. By way of a comparative
example, we may reiterate the observations made by the Court
of Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA
Civ 1282 (CA)] wherein it is observed that:
"It follows from this that a choice of seat for the arbitration
must be a choice of forum for remedies seeking to attack the
award."
(emphasis supplied)
In the aforesaid case, the Court of Appeal had approved the
observations made in A v. B [(2007) 1 All ER (Comm) 591:
(2007) 1 Lloyd's Rep 237] wherein it is observed that:
"... an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. Any claim
for a remedy ... as to the validity of an existing interim or
final award is agreed to be made only in the courts of the
place designated as the seat of arbitration."
(emphasis supplied)
*****
******
******
133. The party which seeks to resist the enforcement of the
award has to prove one or more of the grounds set out in
Sections 48(1) and (2) and/or the Explanation of sub-section
(2). In these proceedings, we are, however, concerned only
with the interpretation of the terms "country where the award
was made" and "under the law of which the award was made".
The provisions correspond to Article V(1)(e) of the New York
Convention, which reads as under:
"V(1) Recognition and enforcement of the award may be
refused, at the request of the party against whom it is
invoked, only if that party furnishes to the competent
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authority where the recognition and enforcement is sought,
proof that-
(a)-(d)***
(e) the award has not yet become binding on the parties,
or has been set aside or suspended by a competent
authority of the country in which, or under the law of
which, that award was made.
(2) Recognition and enforcement of an arbitral award may
also be refused if the competent authority in the country
where recognition and enforcement is sought finds that-
(a) the subject-matter of the difference is not capable of
settlement by arbitration under the law of that country; or
(b) the recognition or enforcement of the award would be
contrary to the public policy of that country."
****
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******
135. Thus, the intention of the legislature is clear that the
court may refuse to enforce the foreign award on satisfactory
proof of any of the grounds mentioned in Section 48(1), by
the party resisting the enforcement of the award. The provision
sets out the defences open to the party to resist enforcement
of a foreign award. The words "set aside or suspended", in
clause (e) of Section 48(1) cannot be interpreted to mean
that, by necessary implication, the foreign award sought to
be enforced in India can also be challenged on merits in Indian
courts. The provision merely recognises that courts of the two
nations which are competent to annul or suspend an award.
It does not ipso facto confer jurisdiction on such courts for
annulment of an award made outside the country. Such
jurisdiction has to be specifically provided in the relevant
national legislation of the country in which the court
concerned is located. So far as India is concerned, the
Arbitration Act, 1996 does not confer any such jurisdiction
on the Indian courts to annul an international commercial
award made outside India. Such provision exists in Section
34, which is placed in Part I. Therefore, the applicability of
that provision is limited to the awards made in India. If the
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
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arguments of the learned counsel for the appellants are
accepted, it would entail incorporating the provision contained
in Section 34 of the Arbitration Act, 1996, which is placed in
Part I of the Arbitration Act, 1996 into Part II of the said Act.
This is not permissible as the intention of Parliament was
clearly to confine the powers of the Indian courts to set aside
an award relating to international commercial arbitrations,
which take place in India.
******
 ******
 ******
134. The aforesaid Article of the New York Convention has
been bodily lifted and incorporated in the Arbitration Act,
1996 as Section 48.
******
 ******
 ******
151.Redfern and Hunter [ Blackaby, Partasides, Redfern and
Hunter (Eds.), Redfern and Hunter on International
Arbitration (5th Edn., Oxford University Press, Oxford/New
York 2009).] at Para 11.96 state that the court which is
competent to sustain or set aside an award is the court of the
country in "alternative one" or "alternative two". The authors,
however, further state that "this court will almost invariably
be the national court at the seat of the arbitration". They
point out that the prospect of an award being set aside under
the procedural law of a State other than that at the seat of
arbitration is unlikely. They point out that an ingenious (but
unsuccessful) attempt was made to persuade the US District
Court to set aside an award made in Mexico, on the basis
that the reference to the law under which that award was made
was a reference to the law governing the dispute and not to
the procedural law (para 11.96). The learned authors had
made a reference to International Standard Electric Corpn.
(US) v. Bridas Sociedad Anonima Petrolera (Argentina)
[(1992) 7 Ybk Comm Arb 639]. The Court rejected the
aforesaid argument with the following observations:
"Decisions of foreign courts under the Convention
uniformly support the view that the clause in question
means procedural and not substantive (that is, in most
cases, contract law)....
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Accordingly, we hold that the contested language in Article
V(1)(e) of the Convention ... refers exclusively to
procedural and not substantive law, and more precisely to
the regimen or scheme of arbitral procedural law under
which the arbitration was conducted."
152. The correct position under the New York Convention is
described very clearly and concisely by Gary B. Born in his
book International Commercial Arbitration (Kluwer Law
International, Vol. 1), Ch. X, p. 1260 as follows:
"This provision is vitally important for the international
arbitral process, because it significantly restricts the extent
of national court review of international arbitral awards
in annulment actions, limiting such review only to the
courts of the arbitral seat (that is, the State where the award
is made or the State whose procedural law is selected by
the parties to govern the arbitration). In so doing, the
Convention ensures that courts outside the arbitral seat
may not purport to annul an international award, thereby
materially limiting the role of such courts in supervising
or overseeing the procedures utilized in international
arbitrations.
At the same time, the New York Convention also allows the
courts of the arbitral seat wide powers with regard to the
annulment of arbitral awards made locally. The Convention
generally permits the courts of the arbitral seat to annul
an arbitral award on any grounds available under local
law, while limiting the grounds for non-recognition of
Convention awards in courts outside the arbitral seat to
those specified in Article V of the Convention. This has the
effect of permitting the courts of the arbitral seat
substantially greater scope than courts of other States to
affect the conduct or outcome of an international
arbitration
through
the vehicle
of
annulment
actions. Together with the other provisions of Articles II
and V, this allocation of annulment authority confirms the
(continued) special importance of the arbitral seat in the
international arbitral process under the New York
Convention."
(emphasis supplied)
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
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153. In our opinion, the aforesaid is the correct way to
interpret the expressions "country where the award was made"
and the "country under the law of which the award was made".
We are unable to accept the submission of Mr Sundaram that
the provision confers concurrent jurisdiction in both the fora.
"Second alternative" is available only on the failure of the
"first alternative". The expression under the law is the
reference only to the procedural law/curial law of the country
in which the award was made and under the law of which the
award was made. It has no reference to the substantive law of
the contract between the parties. In such view of the matter,
we have no hesitation in rejecting the submission of the
learned counsel for the appellants.
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154. At this stage, we may notice that in spite of the aforesaid
international understanding of the second limb of Article
V(1)(e), this Court has proceeded on a number of occasions
to annul an award on the basis that parties had chosen Indian
law to govern the substance of their dispute. The aforesaid
view has been expressed in Bhatia International [(2002) 4
SCC 105] and Venture Global Engg. [(2008) 4 SCC 190] In
our opinion, accepting such an interpretation would be to
ignore the spirit underlying the New York Convention which
embodies a consensus evolved to encourage consensual
resolution of complicated, intricate and in many cases very
sensitive international commercial disputes. Therefore, the
interpretation which hinders such a process ought not to be
accepted. This also seems to be the view of the national courts
in different jurisdictions across the world. For the reasons
stated above, we are also unable to agree with the conclusions
recorded by this Court in Venture Global Engg. [(2008) 4 SCC
190] that the foreign award could be annulled on the exclusive
grounds that the Indian law governed the substance of the
dispute. Such an opinion is not borne out by the huge body
of judicial precedents in different jurisdictions of the world."
11. It was next argued that BALCO, a five-judge decision, clearly
enunciated the principle that the seat of arbitration also indicated the
choice of the law governing the arbitration. Learned counsel relied
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on the observations of the larger bench, and its emphasis on the
"Shashoua principle"13. It was contended that according to that principle,
the designation of a "seat" of the arbitration would carry with it "something
akin to an exclusive jurisdiction clause". Learned counsel referred to
identical conditions in each contract, in the present case, which expressly
stated that arbitration would be "under the Rules of Conciliation and
arbitration of the International Chamber of Commerce, Paris and
Arbitration proceedings shall be in the English language and shall
take place in London." NV Engineering therefore, argued that the
intention of the parties expressed unambiguously in the contract was
that the arbitration was governed by the law of the seat, i.e. UK law.
Therefore, the findings in the impugned judgment were clearly untenable.
12. The appellants also contended that Union of India v Reliance
Industries14 Harmony Innovation Shipping Ltd v Gupta Goal India
Ltd15 and Roger Shashoua v Mukesh Sharma16 have now established
that pre-Balco awards involving agreements which stipulate that the
juridical seat is in India, and which stipulate or can be read as stipulating
that the law governing arbitration would be Indian law, would not be
ruled by BALCO. However, cases where juridical seat is not in India, or
the law governing arbitration is not Indian law, would be bound by BALCO.
Therefore, the impugned judgment, which held to the contrary, cannot
be sustained.
13. The appellant lastly relied on Section 50 of the Act and argued
that the order holding that the petition under Section 34 was not
maintainable was not appealable. Learned counsel also relied on Fuerst
Day Lawson Ltd. v. Jindal Exports Ltd.17 in this context.
14. Mr. Jay Salva, learned senior counsel for Jindal, submitted
that the impugned judgment is unexceptionable and not liable to be
interfered with. He argued that Section 34 operates in a field different
from Section 48. The latter enables the enforcement of a foreign award,
and the court may only refuse enforcement, whereas under Section 34,
the legality of an award can be gone into and the court has the jurisdiction
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
13 The term based on the rule spelt out in Roger Shashoua v Mukesh Sharma 2009
EWHC 957 (Comm)
14 2015 (10) SCC 213
15 2015 (9) SCC 172
16 2017 (14) SCC 722
17 (2011) 8 SCC 333
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to set it aside. This crucial difference was recognized by Indian courts,
as is evident from the decisions in Bhatia International18 and Venture
Global19.
15. Learned counsel contested the appellants' argument that the
decision in BALCO would govern the dispute in the present case. He
relied on the observations in BALCO that arbitration agreements entered
into before the decision, and disputes which arose under them, would
continue to be bound by the pre-BALCO rules. Since, in this case, the
agreements were entered into, and awards too were rendered during
the prevalence of Bhatia20 principle, the later decision in BALCO or any
subsequent judgment could not apply.
16. Learned counsel emphasized that though the ECAAP (the
plant contract) stated that the arbitration was to be in London, under the
ICC. Clause 12.4.1 clearly stated that the contract would be governed
by Indian law, which unambiguously pointed to the fact that the parties
intended that the law governing arbitration too was Indian law. Therefore,
there is no question of the applicability of the ratio in BALCO.
Analysis & Conclusions
17. The decision in Bhatia21, and later, in Venture Global22, had
ruled that resort to remedies under Part I of the Act can be made in
respect of foreign awards, despite the clear dichotomy in the enactment
between domestic awards (covered by Part I) and foreign awards
(covered by Part II). This understanding was re-visited in BALCO where
this court held as follows:
"75. We are also unable to accept the submission of the learned
counsel for the appellants that the Arbitration Act, 1996 does
not make seat of the arbitration as the centre of gravity of
the arbitration. On the contrary, it is accepted by most of the
experts that in most of the national laws, arbitrations are
anchored to the seat/place/situs of arbitration. Redfern in Para
3.54 concludes that 'the seat of the arbitration is thus intended
to be its centre of gravity.' [Blackaby, Partasides, Redfern
18 Supra n. 8
19 Supra n. 9
20 Supra n. 8
21 Supra n.8
22 Supra n.9
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and Hunter (Eds.), Redfern and Hunter on International
Arbitration (5th Edn., Oxford University Press, Oxford/New
York 2009)] This, however, does not mean that all the
proceedings of the arbitration have to take place at the seat
of the arbitration. The arbitrators at times hold meetings at
more convenient locations. This is necessary as arbitrators
often come from different countries. It may, therefore, on
occasions be convenient to hold some of the meetings in a
location which may be convenient to all. Such a situation
was examined by the Court of Appeal in England in Naviera
Amazonica Peruana SA v. Compania International de Seguros
del Peru [Naviera Amazonica Peruana SA v. Compania
International de Seguros del Peru, (1988) 1 Lloyd's Rep 116
(CA)] wherein at p. 121 it is observed as follows:
'The preceding discussion has been on the basis that there
is only one "place" of arbitration. This will be the place
chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of
reference or the minutes of proceedings or in some other
way as the place or "seat" of the arbitration. This does
not mean, however, that the Arbitral Tribunal must hold all
its meetings or hearings at the place of arbitration.
International commercial arbitration often involves people
of many different nationalities, from many different
countries. In these circumstances, it is by no means unusual
for an Arbitral Tribunal to hold meetings-or even hearings
-in a place other than the designated place of arbitration,
either for its own convenience or for the convenience of
the parties or their witnesses.... It may be more convenient
for an Arbitral Tribunal sitting in one country to conduct
a hearing in another country - for instance, for the
purpose of taking evidence.... In such circumstances each
move of the Arbitral Tribunal does not of itself mean that
the seat of arbitration changes. The seat of arbitration
remains the place initially agreed by or on behalf of the
parties.'
76. It must be pointed out that the law of the seat or place
where the arbitration is held, is normally the law to govern
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
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that arbitration. The territorial link between the place of
arbitration and the law governing that arbitration is well
established in the international instruments, namely, the New
York Convention of 1958 and the UNCITRAL Model Law of 1985.
It is true that the terms "seat" and "place" are often used
interchangeably. In Redfern and Hunter on International
Arbitration [Blackaby, Partasides, Redfern and Hunter
(Eds.), Redfern and Hunter on International Arbitration (5th
Edn., Oxford University Press, Oxford/New York 2009)] (Para
3.51), the seat theory is defined thus:'The concept that an
arbitration is governed by the law of the place in which it is
held, which is the "seat" (or "forum" or locus arbitri) of the
arbitration, is well established in both the theory and practice
of international arbitration. In fact, the Geneva Protocol,
1923 states
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95. The learned counsel for the appellants have submitted
that Section 2(1)(e), Section 20 and Section 28 read with
Section 45 and Section 48(1)(e) make it clear that Part I is
not limited only to arbitrations which take place in India.
These provisions indicate that the Arbitration Act, 1996
is subject-matter centric and not exclusively seat-centric.
Therefore, "seat" is not the "centre of gravity" so far as the
Arbitration Act, 1996 is concerned. We are of the considered
opinion that the aforesaid provisions have to be interpreted
by keeping the principle of territoriality at the forefront. We
have earlier observed that Section 2(2) does not make Part I
applicable to arbitrations seated or held outside India. In
view of the expression used in Section 2(2), the
maxim expressumfacitcessaretacitum, would not permit by
interpretation to hold that Part I would also apply to
arbitrations held outside the territory of India. The expression
"this Part shall apply where the place of arbitration is in
India" necessarily excludes application of Part I to
arbitration seated or held outside India. It appears to us that
neither of the provisions relied upon by the learned counsel
for the appellants would make any section of Part I applicable
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to arbitration seated outside India. It will be apposite now to
consider each of the aforesaid provisions in turn.
96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
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We are of the opinion, the term "subject-matter of the
arbitration" cannot be confused with "subject-matter of the
suit". The term "subject-matter" in Section 2(1)(e) is confined
to Part I. It has a reference and connection with the process
of dispute resolution. Its purpose is to identify the courts
having supervisory control over the arbitration proceedings.
Hence, it refers to a court which would essentially be a court
of the seat of the arbitration process. In our opinion, the
provision in Section 2(1)(e) has to be construed keeping in
view the provisions in Section 20 which give recognition to
party autonomy. Accepting the narrow construction as
projected by the learned counsel for the appellants would, in
fact, render Section 20 nugatory. In our view, the legislature
has intentionally given jurisdiction to two courts i.e. the court
which would have jurisdiction where the cause of action is
located and the courts where the arbitration takes place. This
was necessary as on many occasions the agreement may
provide for a seat of arbitration at a place which would be
neutral to both the parties. Therefore, the courts where the
arbitration takes place would be required to exercise
supervisory control over the arbitral process. For example, if
the arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral place
as between a party from Mumbai and the other from Kolkata)
and the tribunal sitting in Delhi passes an interim order Under
Section 17 of the Arbitration Act, 1996, the appeal against
such an interim order under Section 37 must lie to the courts
of Delhi being the courts having supervisory jurisdiction over
the arbitration proceedings and the tribunal. This would be
irrespective of the fact that the obligations to be performed
under the contract were to be performed either at Mumbai or
at Kolkata, and only arbitration is to take place in Delhi. In
such circumstances, both the courts would have jurisdiction
NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY
AMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]
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i.e. the court within whose jurisdiction the subject-matter of
the suit is situated and the courts within the jurisdiction of
which the dispute resolution i.e. arbitration is located.
***
98. We now come to Section 20, which is as under:
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A plain reading of Section 20 leaves no room for doubt
that where the place of arbitration is in India, the parties are
free to agree to any "place" or "seat" within India, be it
Delhi, Mumbai, etc. In the absence of the parties' agreement
thereto, Section 20(2) authorises the tribunal to determine
the place/seat of such arbitration. Section 20(3) enables the
tribunal to meet at any place for conducting hearings at a
place of convenience in matters such as consultations among
its members for hearing witnesses, experts or the parties.
99. The fixation of the most convenient "venue" is taken care
of by Section 20(3). Section 20, has to be read in the context
of Section 2(2), which places a threshold limitation on the
applicability of Part I, where the place of arbitration is in
India. Therefore, Section 20 would also not support the
submission of the extra-territorial applicability of Part I, as
canvassed by the learned counsel for the appellants, so far
as purely domestic arbitration is concerned.
Only if the agreement of the parties is construed to
provide for the "seat"/"place" of arbitration being in India
- would Part I of the Arbitration Act, 1996 be applicable. If
the agreement is held to provide for a "seat"/"place" outside
India, Part I would be inapplicable to the extent inconsistent
with the arbitration law of the seat, even if the agreement
purports to provide that the Arbitration Act, 1996 shall govern
the arbitration proceedings."
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110. Examining the fact situation in the case, the Court
observed as follows: (Shashoua case [2009 EWHC 957
(Comm)])
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"The basis for the court's grant of an anti-suit injunction
of the kind sought depended upon the seat of the
arbitration. An agreement as to the seat of an arbitration
brought in the law of that country as the curial law and
was analogous to an exclusive jurisdiction clause.