Introduction

The High Court of Calcutta in Medima LLC v. Balasore Alloys Limited,^[1] was recently presented with an issue to determine whether the parties’ designation of English law as curial law and the law governing the arbitration agreement, would exclude the operation of Section 9 of the Arbitration and Conciliation Act, 1996^[2] (hereinafter, “A&C Act”) sans any express exclusion in that regard. In its judgement dated 3^rd August, 2021, the Court has held, that applicability of Section 9 to foreign arbitration cannot be excluded unless and until the parties have expressly provided for such exclusion in the arbitration agreement. To put it otherwise, mere choice of foreign curial law and seat of arbitration would not be taken to mean that the parties have impliedly excluded application of Section 9. Despite the 2016 Amendment^[3] (with retrospective effect from 23^rd October, 2015) attempting to clarify the Bhatia-BALCO chasm and the conundrum of applicability of Part I of the A&C Act, especially Section 9, the controversy still exists with this pronouncement being the evidence of the same. This article thus seeks to analyse the Court’s pronouncement and its interpretation of the phrase “agreement to the contrary” as found in the proviso to Section 2 (2) of the A&C Act, which is the bone of the whole quandary. 

Background and the Issues in Dispute

Medima LLC, the applicant-petitioner, was the award-holder of the award dated 29^th March passed in arbitration proceedings before the International Chamber of Commerce (hereinafter, “ICC”). The proceedings were governed by the British law with London, UK, as the designated seat of arbitral proceedings. Medima LLC wanted an interim protective order via a Section 9 application to secure the dues payable by Balasore Alloys Limited, the award-debtor (hereinafter, “Balasore”). Balasore took an objection to the maintainability of the application by arguing that by choosing a foreign seat for arbitration, they have excluded the application of Section 9 of the A&C Act.

The essence of Balasore’s argument was that since Clause 23 of the underlying agreement provides that the governing law for arbitration seated at London would be English law, the natural inference is that the parties sought to exclude the applicability of Section 9, Clause 23 operating as “agreement to the contrary”. Further, the Legislature’s omission of the word “express” before the phrase “agreement to the contrary”, despite the 246^th Law Commission Report’s^[4] recommendation, entails that such an agreement can either be express or implied. Counsel for Medima LLC on the other hand, by tracing the judicial and legislative histories of the provisions involved, argued that an agreement to exclude the application of Section 9 has to be in express terms.

Thus, to settle the dispute, the Court formed two issues for determination. Firstly, can an application of Section 9 be extended to foreign awards made under ICC Rules in arbitration proceedings seated at London, and Secondly, does the agreement providing the curial law to be English law qualify as an “agreement to the contrary” under the proviso to Section 2 (2) for it to be excluded from Section 9’s application.

Analysis of the Judgement

The Court, after citing various pronouncements, came to the conclusion that even though the Legislature omitted to include the word “express” in the proviso, its significance is little and it requires that an agreement to exclude the application of provisions mentioned in it must be clear, unequivocal and unambiguous. In paragraph 15 of the judgement, the Court, in clear terms, held that the agreement must, by clear and express terms, indicate that it is the parties’ intention to exclude the operation of Section 9. Mere choosing of foreign curial law in itself cannot be taken to mean an implied exclusion of Section 9’s application.

1. Indian Court’s power to grant interim reliefs to foreign seated arbitration

In deciding whether the court is competent to award interim measures in case of foreign seated arbitration where the parties have already designated a governing law, the Court placed its reliance on several pronouncements. The Court referred to the judgement of Bhatia International v. Bulk Trading S.A.^[5] (hereinafter, “Bhatia International”) and Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc.^[6] (hereinafter, “BALCO”) to trace the legislative history of Section 2 (2), the reasons which prompted the 246^th Law Commission’s report,^[7] and the subsequent 2016 Amendment which appended a proviso to Section 2 (2). In Bhatia International, the Supreme Court had held that since Section 2 (2) is not worded to mean that Part I shall apply to domestic arbitration “only”, its application can be extended to even Part II arbitrations and awards. This ruling was then overturned by the Supreme Court in BALCO where the 5-Judge Bench held that Section 9’s application cannot be extended to Part II. This conflict prompted the 246^th Law Commission to suggest an overhaul in the A&C Act which manifested in the form of the 2016 Amendment giving us the current Section 2 (2) with a proviso appended to it.^[8] By way of this amendment, the ghost of Bhatia International was revived to a certain extent allowing only a few provisions to be applicable to even foreign seated international commercial arbitrations. Thus, essentially, the Indian courts have the power to grant interim measures even if the seat of arbitration is foreign with only one caveat that the parties must not have agreed for an exclusion of the application of Section 9.

The Calcutta High Court thereafter referred to Article 17 of United Nations Commission on International Trade Law (UNCITRAL) Model Law, which enables a court to grant interim measures irrespective of whether arbitral proceedings are conducted in their place or territory of the court’s State.^[9]

Therefore, the Court here effectively established its jurisdiction to grant interim measures by further stating that any other conclusion would prejudice the award holder as the award debtor may do away with its assets rendering the award as a whole infructuous. Thus, the only issue that was left for determination was whether the choice of foreign law can be taken to mean the exclusion of Section 9.

1. Interpretation of “agreement to the contrary”: Whether the exclusion must be express or implied?

After establishing its jurisdiction, the Court sought to decide the question that whether the parties have ousted Section 9’s application by incorporating Clause 23. The Court interpreted the phrase “agreement to the contrary” to mean an express agreement concerning exclusion of the application. In response to Balasore’s arguments highlighting the omission of the word “express” by the Legislature while adding the proviso, which was unlike the 246^th Law Commission Report’s recommendations, the Court referred to other provisions of the A&C Act which have provided the parties a scope to deviate from them such as Sections 10, 11, 13, 20 and 22, (which have phrases such as “parties are free to determine” or “agree”), and Sections 21, 24, 25, 26, 29, 31 and 33 (which are worded as “unless otherwise agreed by the parties”).  By placing reliance on these provisions, the Court was of the opinion that even though they do not contain words such as “express”, there is still a requirement for the parties to form a clear and an unequivocal intention to derogate from the provisions of the A&C Act which allows such derogations. 

The Court then scrutinised certain judgements where similar issues were dealt with. For instance, in Aircon Beibars FZE v. Heligo Charters Pvt. Ltd.^[10] and Heligo Charters Pvt. Ltd. v Aircon Feibars FZE,^[11] the Single and Division Benches of the Bombay High Court, respectively, held that even though the arbitration agreement provided that an arbitration to be conducted in Singapore would  be governed by the Singapore International Arbitration Centre (SIAC) rules, this would not be taken to mean that the application of Section 9 has been excluded sans any specific agreement in that regard. Thereafter, a reference was made to Delhi High Court’s  judgments in Big Charter Pvt. Ltd. v. Ezen Aviation Pty. Ltd.^[12] and Raffles Design International v. Educomp Professional Education^[13] where similar reasoning was followed to grant interim measures under Section 9, despite a foreign choice of curial law.

However, a seemingly different view was taken in Ashwani Minda v. U-Shin Ltd.^[14] Here, the parties chose proceedings to be held in Japan with Japan Commercial Arbitration Association (JCAA) rules to govern it. Thereafter, Ashwani Minda applied for emergency arbitration which was accepted, and during the pendency of proceedings before it, a request for arbitration was made according to which, a proper arbitral tribunal was constituted. However, before constitution of the said tribunal, the appellant moved a Section 9 application before the Delhi High Court. The Single-Judge Bench dismissed the petition on the ground of maintainability holding that the choice of JCAA rules operates as an implied exclusion of Section 9. Thus, reference was made to a Division Bench. The question that the Division Bench was asked to decide upon, was whether after invoking the JCAA process and approaching an emergency arbitrator, and thereafter failing to obtain required relief, can the party seek a recourse to Section 9 of the A&C Act? The Court answered this negatively. The choice of JCAA was thus taken as an exclusion to the provisions of Part I.

Nevertheless, the Calcutta High Court distinguished this judgment from the Medima case^[15] on facts, stating that the parties, therein, had already approached an emergency arbitrator for the interim reliefs which they failed to obtain and, only after that failure, they had sought recourse to a Section 9 petition, which is not the case here.

Conclusion

The conclusion essentially remains that despite the 2016 Amendment’s attempt at clarifying the law by adding the proviso, there still subsists a conundrum in seeking interim measures in foreign seated arbitration where the parties have chosen a foreign law. The root of the issue is the ‘express-implied’ exclusion issue. This issue is further aggravated if reference is made to the pre-amendment Supreme Court’s decision in Videocon Industries Ltd v. Union of India^[16] and the Delhi High Court’s judgement in Max India Limited v. General Building Corporation,^[17] where it has been held that the choice of foreign law would be taken to mean implied exclusion of Part I of the A&C Act.

Thus, either the Legislature needs to clarify the law by adding the term “express” as recommended by the 246^th Law Commission, or the Supreme Court needs to pronounce a final verdict to resolve the “implied-express” exclusion dilemma.

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References:

[1]    Medima LLC v. Balasore Alloys Limited, AP/267/2021 (2021) AP 267 (India).

[2]    The Arbitration and Conciliation Act, No. 26 of 1996, Acts of Parliament, § 9 (India).

[3]    The Arbitration and Conciliation (Amendment) Act, No. 3, Acts of Parliament, 2015 (India).

[4]    Report no. 246, Law Commission of India, (August, 2014), Available at: https://lawcommissionofindia.nic.in/reports/report246.pdf.

[5]    Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105 (India).

[6]    Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc, (2012) 9 SCC 552 (India).

[7]    Supra note 4.

[8]    Id.

[9]    UNCITRAL Model Law on International Commercial Arbitration 1985, Art. 17.

[10]   Aircon Beibars FZE v. Heligo Charters Pvt. Ltd, 2017 SCC OnLine Bom 631 (India).

[11]    Heligo Charters Pvt. Ltd. v. Aircon Feibars FZE, (2018) 5 AIR Bom R 317 (India).

[12]   Big Charter Pvt. Ltd. v. Ezen Aviation Pty. Ltd., 2020 SCC OnLine Del 1713 (India).

[13]   Raffles Design International v. Educomp Professional Education, 2016 SCC OnLine Del 5521 (India).

[14]   Ashwani Minda v. U-Shin Ltd., 2020 SCC OnLine Del 1648 (India).

[15]   Supra note 1.

[16]   Videocon Industries Ltd v. Union of India, (2011) 6 SCC 161 (India).

[17]   Max India Limited v. General Building Corporation, 2009 (3) Arb. LR 162 (India).