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Arbitration and conciliation Act Sec.34 – part 1 of Arbitration Act not applies to international Commercial Arbitration held outside India – Arbitration: All disputes arising out of or in conjunction with this Contract shall be referred to the Refined Sugar Association, London for settlement in accordance with the Rules relating to Arbitration. This Contract shall be governed by and construed in accordance with English Law.’ – High court allowed the objection – Apex court confirmed the same = Sakuma Exports Ltd. …..Petitioner Versus Louis Dreyfus Commodities Suisse S.A. …..Respondent= 2014 (March. Part ) judis.nic.in/supremecourt/filename=41361

Arbitration and conciliation Act Sec.34 –  part 1 of Arbitration Act not applies to international Commercial  Arbitration  held  outside India – Arbitration: All disputes arising out of or  in  conjunction  with this Contract shall be referred to the Refined  Sugar  Association, London for settlement in accordance  with  the  Rules  relating  to Arbitration.  This Contract shall be governed by and  construed  in accordance with English Law.’ – High court allowed the objection – Apex court confirmed the same = 

 

The Appellant is an Indian Company which carries on  the  business

      of import and export of sugar among other commodities.  The Respondent

      is a Swiss Company with whom the Appellant entered into  an  agreement

      on 12th January 2010 for  the purchase of  2700  metric  tons  of  Brazilian  white  sugar  of  a  stipulated description. 

Disputes arose between  the  parties.   

The  agreement

      between the parties contained  inter  alia  the  following  terms  and

      conditions:

 ‘Terms and conditions:

   This Contract  is  subject  to  the  Rules  of  the  Refined  Sugar

        Association, London as fully as if  the  same  had  been  expressly

        inserted herein, whether or not either or both parties  to  it  are

        Members of the Association.

  If any provision of this Contract is inconsistent with  the  Rules,

        such provision shall prevail.’

Parties envisaged that all disputes would be submitted to arbitration.

       The arbitration agreement was thus:

  ‘Arbitration: All disputes arising out of or  in  conjunction  with

        this Contract shall be referred to the Refined  Sugar  Association,

        London for settlement in accordance  with  the  Rules  relating  to

        Arbitration.  This Contract shall be governed by and  construed  in

        accordance with English Law.’

A final award was passed by the arbitral tribunal on 31 December, 2010

      which was sought to be challenged  by  the  Appellant  in  proceedings

      under Section 34 of the Act of 1996 before the learned Single Judge of

      this Court.  

An objection was taken to the jurisdiction of this  Court

      to entertain the petition on the ground that the applicability of Part-

      I of the Act was excluded by the agreement  between  the  parties  and

      consequently even under  the  law  as  it  then  prevailed  in  Bhatia

      International, a Petition under Section 34 was not maintainable.   

The

      learned Single Judge has upheld the objection  and  has  come  to  the

      conclusion  that  this  Court  has  no  jurisdiction  to  entertain  a

      challenge to the award under Section 34.  The judgment  is  called  in

      question in appeal. =

 

There is no dispute between the parties that  

the  Constitution  Bench

      judgment of this Court in the case of Bharat  Aluminium  Company  etc.

      vs. Kaiser Aluminium Technical Services Inc. etc. (BALCO)[1] overruled

      

the earlier judgment in Bhatia International Vs. Bulk Trading S.A. and

      Anr.[2] 

in coming to the conclusion that Part I of the Act would  have

      no application to international Commercial  Arbitration  held  outside

      India, but on account of further direction that the  law  so  declared

      shall apply only prospectively to all arbitration agreements  executed

      thereafter, the arbitration agreement in the present  case  is  to  be

      governed by the law  decided  in  the  case  of  Bhatia  International

      (supra).   

According  to  the  judgment  in   the   case   of   Bhatia

      International (supra) the provisions of Part I of the Act would  apply

      to International Commercial Arbitration held out of India  unless  the

      parties by agreement, express or implied, exclude all or  any  of  its

      provisions.

Conclusion

We find no merit in the petition and the same is dismissed as such. No

      costs.

2014 (March. Part ) judis.nic.in/supremecourt/filename=41361

ANIL R. DAVE, SHIVA KIRTI SINGH

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Petition for Special Leave to Appeal (Civil) No.27404 of 2013
Sakuma Exports Ltd. …..Petitioner

Versus

Louis Dreyfus Commodities Suisse S.A. …..Respondent

 

 

J U D G M E N T

 

SHIVA KIRTI SINGH, J.

1. After hearing the parties at length and upon going through the
impugned judgment and order dated 6.8.2013 passed by Division Bench of
High Court of Judicature at Bombay in Appeal No. 337 of 2013, filed
under Section 37 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the ‘Act’), we are of the considered
view that the impugned order is based upon proper appreciation of
relevant facts and follows the law laid down by this Court correctly
in arriving at the finding that in the facts of the case the courts in
India have no jurisdiction to entertain the petition under Section 34
of the Act, challenging the international commercial award of an
arbitral tribunal constituted by the Refined Sugar Association,
London.

S.L.P.(C)No.27404 of 2013 …. (contd.)
2. There is no dispute between the parties that the Constitution Bench
judgment of this Court in the case of Bharat Aluminium Company etc.
vs. Kaiser Aluminium Technical Services Inc. etc. (BALCO)[1] overruled
the earlier judgment in Bhatia International Vs. Bulk Trading S.A. and
Anr.[2] in coming to the conclusion that Part I of the Act would have
no application to international Commercial Arbitration held outside
India, but on account of further direction that the law so declared
shall apply only prospectively to all arbitration agreements executed
thereafter, the arbitration agreement in the present case is to be
governed by the law decided in the case of Bhatia International
(supra). According to the judgment in the case of Bhatia
International (supra) the provisions of Part I of the Act would apply
to International Commercial Arbitration held out of India unless the
parties by agreement, express or implied, exclude all or any of its
provisions.
3. Since we are in agreement with the views of learned High Court of
Bombay, it is not necessary to go to the factual details but on
account of lengthy submissions advanced on behalf of the petitioner,
we feel it proper to extract paragraph 3 of the impugned judgment
which reflects not only the relevant facts but also the relevant terms
and conditions of the agreement between the parties. It reads thus:
“3. The Appellant is an Indian Company which carries on the business
of import and export of sugar among other commodities. The Respondent
is a Swiss Company with whom the Appellant entered into an agreement
on 12th January 2010 for the purchase
S.L.P.(C)No.27404 of 2013 …. (contd.)
of 2700 metric tons of Brazilian white sugar of a stipulated
description. The sugar was to be shipped between 15 January 2010 and
15 February 2010 at the option of the seller, the Respondent. The
port of destination was to be Nhava Sheva or Kolkata at the option of
the Appellant. Disputes arose between the parties. The agreement
between the parties contained inter alia the following terms and
conditions:
‘Terms and conditions:
This Contract is subject to the Rules of the Refined Sugar
Association, London as fully as if the same had been expressly
inserted herein, whether or not either or both parties to it are
Members of the Association.
If any provision of this Contract is inconsistent with the Rules,
such provision shall prevail.’
Parties envisaged that all disputes would be submitted to arbitration.
The arbitration agreement was thus:
‘Arbitration: All disputes arising out of or in conjunction with
this Contract shall be referred to the Refined Sugar Association,
London for settlement in accordance with the Rules relating to
Arbitration. This Contract shall be governed by and construed in
accordance with English Law.’
A final award was passed by the arbitral tribunal on 31 December, 2010
which was sought to be challenged by the Appellant in proceedings
under Section 34 of the Act of 1996 before the learned Single Judge of
this Court. An objection was taken to the jurisdiction of this Court
to entertain the petition on the ground that the applicability of Part-
I of the Act was excluded by the agreement between the parties and
consequently even under the law as it then prevailed in Bhatia
International, a Petition under Section 34 was not maintainable. The
learned Single Judge has upheld the objection and has come to the
conclusion that this Court has no jurisdiction to entertain a
challenge to the award under Section 34. The judgment is called in
question in appeal.”

 

 

 
S.L.P.(C)No.27404 of 2013 …. (contd.)
4. After discussing appropriate case laws, the High Court summarized the
relevant facts and its views in paragraph 20 which also conveniently
extracts Rule 8 of the Rules of Refined Sugar Association, London.
Paragraph 20 reads as follows:
“20. In the present case, the parties have specifically made their
contract subject to the rules of the Refined Sugar Association,
London. Leaving no ambiguity of interpretation the contract mandates
that the rules of the Refined Sugar Association, London are
incorporated ‘as fully as if the same has been expressly inserted’ in
the contract. The governing law of the contract is English law. All
disputes arising out or in conjunction with the contract were to be
referred to the Refined Sugar Association for settlement in accordance
with the rules relating to arbitration of the Association. The law in
the U.K. is, therefore, the substantive law of the contract. The seat
of the arbitration is in the U.K. Parties have made it clear that the
rules of the Refined Sugar Association would govern the resolution of
their disputes. Rule 8 of the Rules of the Refined Sugar Association
(on which there is no dispute between the parties during the course of
the hearing of the appeal) provides as follows:
‘8. For the purpose of all proceedings in arbitration, the
contract shall be deemed to have been made in England, any
correspondence in reference to the offer, the acceptance, the place
of payment or otherwise, not-withstanding, and England shall be
regarded as the place of performance. Disputes shall be settled
according to the law of England wherever the domicile, residence or
place of business of the parties to the contract may be or become.
The seat of the Arbitration shall be England and all proceedings
shall take place in England. It shall not be necessary for the
award to state expressly the seat of the arbitration.’
The terms of the purchase contract as well as Rule 8 of the Rules of
the Refined Sugar Association would make it clear that disputes shall
be settled in accordance with the law of England wherever the
domicile, residence or place of business of parties to the contract
may be or become. Moreover, for the purposes of all proceedings in
arbitration, the contract shall be deemed to have been made in England
and England shall be regarded as the place

 

 
S.L.P.(C)No.27404 of 2013 …. (contd.)

of performance. The seat of the arbitration shall be England and all
proceedings shall take place in England. On the basis of these
provisions, it has been submitted that parties have, by the terms of
their agreement, impliedly excluded the provisions of Part-I. We find
merit in the submission. It is clear from the terms and conditions
which have been accepted by the parties in the purchase contract, read
with Rule 8 that parties have accepted English law as the governing
law of the contract; that the seat of the arbitration would be London;
that disputes shall be settled according to the law of England which
would include the resolution of disputes and that all proceedings
shall take place in England. Alternatively, even if it were to be
held that parties have not provided for the curial law governing the
arbitration, the decision in Bhatia International does not prohibit
the exclusion of the application of Part-I on account of the proper
law of the contract being a foreign law. Where the proper law
governing the contract is expressly chosen by the parties, which they
have done in the present case by selecting English law as the proper
law of the contract, that law must, in the absence of an unmistakable
intention to the contrary, govern the arbitration agreement. The
arbitration agreement, though it is collateral or ancillary to the
main contract is nevertheless a part of the contract. In an
application for challenging the validity of an arbitral award under
Section 34, the Court would necessarily have to revert to the law
governing the arbitration agreement which, in our considered view,
would be the law of England.”
5. Since one of the terms and conditions of the agreement makes the
contract subject to the Rules of the Refined Sugar Association, London
by treating the same to have been expressly inserted in the agreement,
Rule 8 of the Refined Sugar Association, London leaves no manner of
doubt that the parties have not only accepted English law as the law
governing the contract but the disputes and the arbitration shall also
be governed by the law of England. The seat of Arbitration is
admittedly England.
6. Learned counsel for the petitioner highlighted that the arbitration
clause is not strictly the same as recommended by the Refined
Sugar Association,

S.L.P.(C)No.27404 of 2013 …. (contd.)
London which clearly stipulated that the arbitration shall be conducted in
accordance with the English law. But this does not take us far. The
condition that the contract is subject to the Rules of the Refined Sugar
Association, London which stand inserted in the contract and wordings of
Rule 8 clinch the relevant issue in favour of the respondent.
7. We find no merit in the petition and the same is dismissed as such. No
costs.
…………………………….J.
[ANIL R. DAVE]

 

 
……………………………..J.
[SHIVA KIRTI SINGH]

New Delhi.
March 28, 2014.

———————–
[1] 2012 (9) SCC 552
[2] 2002 (4) SCC 105

———————–
3

 

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