Law laid down as declaratory in nature, is to be reckoned as law always #indianlaws

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. 

The issue before the Apex Court in the instant matter was in the context of applicability of Section 9 of the Arbitration and Conciliation Act, 1996 (Act) on the foundation that Section 9 of the Act is limited to the applications to arbitration that takes place in India and has no applicability to arbitration which takes place outside India, more so in view of the decision in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.

In the present matter order passed in the application under section 9 of the Act was challenged before the High Court on the premise that the order was absolutely without jurisdiction and hence, unsustainable in law. The contrary contention raised was that the application was maintainable inasmuch as the contract between the parties was entered into prior to the decision in Bharat Aluminium Co. case and, therefore, the principle laid down in the said decision was not attracted to the facts of the present case.

The High Court took the view that the law laid down by the Supreme Court in Bharat Aluminium Co.’s case is declaratory in nature and contention that the principle laid down in Bharat Aluminium case would not be applicable not correct. 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. 

The Apex Court held that the arbitration agreement in the instant case was executed prior to the date of decision in Bharat Aluminium case date and the addendum to the said agreement had come into existence afterwards. Therefore, there can be no doubt that the authority in Bharat Aluminium Co. case would not be applicable for determination of the controversy in the instant case and in fact, the pronouncement in Bhatia International case would be applicable as there was nothing in the addendum to suggest any arbitration and, in fact, it was controlled and governed by the conditions postulated in the principal contract. 

In the decision in Bhatia International case it was held that provisions of Part I of the Section 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. The decision in Bhatia International case was followed in Venture Global Engg. Case.

The two decisions above clearly laid 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. 

In reference to the clause of arbitration in the present matter, it was that clear if any dispute or difference would arise under the charter, arbitration in London to apply; that the arbitrators are to be commercial men who are members of London Arbitration Association; the contract 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 was no other provision in the agreement that any other law would govern the arbitration clause.

It was accordingly held that it would be appropriate to interpret the clause as a proper clause or substantial clause and not a curial or a procedural one by which the arbitration proceedings are to be conducted and hence the seat of arbitration would be at London. Accordingly, the implied exclusion principle stated in Bhatia International case would be applicable. Thus, the courts in India would not have jurisdiction as there is implied exclusion.

[Harmony Innovation Shipping Ltd. vs. Gupta Coal India Ltd. & Anr.]
(SC, 10.03.2015 – Civil Appeal No. 610 of 2015)