INTRODUCTION
An award-holder of an arbitration which took place outside India would be rendered remediless if prompt and effective interim measures are not granted to the award-holder in the interregnum in relation to the assets of the award-debtor which are located in India.
The aforesaid was observed by hon'ble Justice Moushumi Bhattacharya of the Calcutta High Court in the matter of Medima LLC v. Balasore Alloys Limited,1 while deciding upon the maintainability of an application for interim measures [Relief Application] under Section 9 of the Arbitration and Conciliation Act, 1996 [Act, 1996], post-award, in a foreign-seated arbitration. The Calcutta High Court in the case also dealt with the applicability of proviso to Section 2(2) of the Act, 1996 in order to ascertain whether the intention of the parties to the agreement was to exclude the recourse to Section 9 of the Act, 1996.
BRIEF FACTS
Medima LLC [Applicant] was the claimant in an arbitration against Balasore Alloys Limited i.e., award-debtor [Respondent] and had emerged as the successful party i.e. award-holder, in the Award dated 29.03.2021with an amount of USD 30,35,249.87 (equivalent to INR 22,08,75,133/-) in its favour. The Award is of the International Chambers of Commerce [ICC] passed in proceedings governed by British law with the seat of arbitration in London, UK.
Thereafter, the Applicant sought protective orders to secure the dues payable by the Respondent. The Respondent, as a consequence to the Relief Application, raised objection to the maintainability of the same.
ISSUES FOR CONSIDERATION
The issues before the Calcutta High Court is reproduced hereinbelow:
Whether Section 9 of Act, 1996 can be made applicable to a foreign award made under the Rules of the ICC in arbitration proceedings governed by British Law with the seat of arbitration in London?
Whether the arbitration agreement in the present case providing for the substantive, curial as well as the law governing the arbitration agreement to be governed by British law can be seen as 'an agreement to the contrary' under the proviso to section 2(2) of the Act, 1996?
CONTENTION OF THE PARTIES
a. Contention of the Applicant
The Applicant traced the legislative history of Section 2(2) of the Act, 1996 in which the proviso was introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act, 2015). The Applicant referred to Bhatia International vs Bulk Trading S.A.2 which considered the applicability of Part I of the Act,1996 in the context of International Commercial Arbitrations which take place outside India.
Furthermore, the Applicant relied on the recent Supreme Court judgment in the matter of PASL Wind Solutions Pvt. Ltd. v. GE Power Conversion India Pvt. Ltd.3, which held that courts in India may pass interim orders in relation to assets located in India in an arbitration which takes place outside India. The Applicant further relied on Aircon Beibars FZE v. Heligo Charters Pvt. Ltd.4, Heligo Charters Pvt. Ltd. v. Aircon Beibars FZE.5 and Big Charter Private Ltd v. Ezen Aviation Pty. Ltd.6 in support of the Relief Application.
b. Contention of the Respondent
The Respondent argued that both the Applicant as well as the Respondent [Parties] agreed that the substantive law, the curial law and the law governing the arbitration agreement would be English law. Therefore, any recourse taken by either of the Parties in respect of the award must necessarily be before the courts in England or before the ICC.
The Respondent placed reliance on Clause 23 of the Agreement dated 31.03.2018 executed between the Parties to contend that the said clause clearly reflected the exclusion of Section 9 of the Act, 1996 and that the said clause, being the arbitration agreement between the Parties, would fall within the exception carved out in the proviso to Section 2(2) of the Act, 1996.
The Respondent contended that Section 9 of the Act, 1996, does not entail grant of interim reliefs post-award in a foreign arbitration and that such relief can be given before, during or after the arbitration in relation to domestic awards. Therefore, the proviso to Section 2(2) cannot override the express language of Section 9.
The Respondent relied on Raffles Design International India Private Limited v. Educomp Professional Education Limited7; and on Ashwani Minda v. U-Shin Ltd.8 in support of the proposition that Part I of the Act,1996 would be excluded where parties have agreed to do so.
c. Findings of the Calcutta high court
The Calcutta High Court observed that prior to the Amendment Act, 2015, Section 2(2) only contained the prescription that Part I of the Act would apply to domestic arbitrations and nothing more. However, after the insertion of the proviso to Section 2(2) vide the Amendment Act, 2015, there was a quantum shift in effect of Section 2(2) in respect of (i) international commercial arbitrations, (ii) international commercial arbitrations including those outside India, and (iii) arbitral awards which are being made or are in the process of being made in a place outside India which are capable of being enforced and recognised under Part II of the Act, 1996.
The Calcutta High Court referred to the Supreme Court cases of Bhatia and Bharat Aluminium Company vs Kaiser Aluminium Technical Services Inc.9, which had a bearing on the Law Commission Report. The Calcutta High Court observed that in the case of Bhatia, the Supreme Court held that the absence of the word 'only' from Section 2(2) of the Act, 1996 (as it existed prior to the Amendment Act, 2015) would not debar application of Part I to international commercial arbitrations held outside India unless the parties agreed to exclude such applicability. However, the Supreme Court in BALCO overruled Bhatia and held that Section 9 could not be made applicable to arbitrations which take place outside India but declared that the law laid down in BALCO would apply prospectively to arbitration agreements executed before 06.09.2012 (being the date on which BALCO judgment was delivered), thereby, creating an anomalous situation wherein the courts could grant interim orders in respect of foreign-seated arbitrations despite BALCO holding otherwise. The Calcutta High Court also referred to other enactments supporting the intervention by the Indian courts in foreign-seated arbitrations, like, the Statement of Objects and Reasons of the Arbitration and Conciliation (Amendment) Bill, 2015, wherein its Clause 6 specifically provides to ensure that an Indian Court can exercise jurisdiction to grant interim measures, etc., even where the seat of arbitration is outside India. Furthermore, Article 17 J of the UNCITRAL Model Law on International Commercial Arbitrations with amendments as adopted in 2006 states that "a court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts". Finally, reference was made to Article 28.2 of the Arbitration Rules of ICC in force from 01.03.2017 which states that the parties may apply to any competent judicial authority for interim or conservatory measures.
With reference to the arguments of the Parties on the language of the proviso of Section 2(2) of the Act, 1996 and the agreement between the Parties thereby excluding the application of Section 9, the Calcutta High Court held that dropping the word 'express' in the language of the proviso is inconsequential and that the structure of the proviso as it exists today is that there must be a clear, unequivocal and unambiguous articulation by the Parties to exclude the application of Section 9 from the arbitration which is to take place outside India. Therefore, an arbitration agreement which merely chooses the law governing the underlying agreement, the arbitration and the conduct thereof without anything more cannot be seen as excluding the application of Section 9 by implication and closing the gates to Section 9 or the scope of the proviso to Section 2(2) of the Act, 1996.
The Calcutta High Court further referred to the case of PASL Wind wherein the Supreme Court has held that the expression "International Commercial Arbitration" under Section 2(1)(f) of the Act, 1996 was party-centric whereas the same expression used in the proviso to Section 2(2) was place-centric, therefore the proviso refers to a foreign-seated arbitration to which Part II of the Act, 1996 applies. Therefore, the expression "International Commercial Arbitration" used in the proviso would necessarily mean a foreign-seated arbitration which forms the substratum of Part II of the Act, 1996.
On the issue of non-availability of the remedy under Section 9 in a post-award situation in relation to a foreign award which is enforceable under Part II of the Act, 1996, the Calcutta High Court held that Section 9 read with the proviso to Section 2(2) would require a purposive construction which would be in line with the intention of the framers for bringing in the proviso by the Amendment Act, 2015. The Calcutta High Court found substance in the contention that every attempt should be made to harmonise the provisions of a statute wherever there appears to be a conflict and thereby, referred to the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. vs. State of Uttar Pradesh10, wherein the Supreme Court spoke for the rule of harmonious construction and the presumption that every part of the statute should be given effect to and that no clause should be reduced to a dead letter. Reliance was also placed on the case of High Court of Gujarat vs. Gujarat Kishan Mazdoor Panchayat.,11 wherein the Supreme Court explained that while the court is not entitled to re-write the statute itself, it is not debarred from "ironing out the creases". Finally, reference was made to The King vs. Dominion Engineering12, which held that in the event of a conflict, the later provision would prevail since it expresses the last intention of a legislature. Therefore, the last intention of the legislature would be the proviso to Section 2(2) for ascertaining the true scope and meaning of Section 9 and the power of the court to make interim measures in a foreign seated arbitration post-award.
On merits, the Calcutta High Court held that the Agreement executed between the Parties permits enforcement of the award in any court having jurisdiction over the party against whom enforcement is sought.
Hence, the Calcutta High Court in light of its findings answered the issues for consideration with the view that the Relief Application under Section 9 of the Act,1996, in respect of the Award made under the Rules of ICC, in a London-seated arbitration, is maintainable and the Applicant is entitled to seek interim measures against the Respondent in India.
Footnotes
1. Decided on 03.08.2021, AP/267/2021, Ordinary Original Civil Jurisdiction, High Court of Calcutta; Other Citation: MANU/ WB/0540/2021
2. (2002) 4 SCC 105 (hereinafter to be referred as "Bhatia")
3. 2021 SCC OnLine SC 331 (hereinafter referred as "PASL Wind")
4. 2017 SCC OnLine Bom 631
5. 2018 SCC OnLine Bom 1388
6. 2020 SCC OnLine Del 1713
7. 2016 SCC OnLine Del 5521
8. 2020 SCC OnLine Del 1648
9. (2012) 9 SCC 552 (hereinafter to be referred as "BALCO")
10. AIR 1961 SC 1170
11. (2003) 4 SCC 712
12. AIR 1947 PC 94
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