M/S CENTROTRADE MINERALS & METAL INC v. HINDUSTAN COPPER LTD

Judgment

9 S.C.R. 83 M/S CENTROTRADE MINERALS & METAL INC. A v. HINDUSTAN COPPER LTD. (Civil Appeal No. 2562 of2006) DECEMBER 15, 2016 (MADAN B. LOKUR, R. K. AGRAWAL AND DR. D. Y. CHANDRACHUD, JJ.) Arbitration and Conciliation Act, 1996 - s. 48 - Dispute resolution by two-tier arbitration system - Validity of - Parties entered into a contract containing arbitration clause - Subsequently dispute between the parties - Appellant company invoked arbitration clause - Appointment of arbitrator by Indian Council of Arbitration, who gave NIL award - Thereafter, invocation of second part of the arbitration clause by the appellant company - Award passed by arbitrator in London in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce - Application u!s. 48 by the appellant company seeking enforcement of the said award - Validity of two tier arbitration - Held: Resolving of disputes by two tier arbitration system was valid under the Indian law and not contrary to the public policy - Arbitration clause in the agreement between the parties does not violate the fundamental or public policy of India by the parties agreeing to a second instance arbitration - Parties to an arbitration agreement have the autonomy to decide not only on the procedural law to be followed but also the substantive law. Adjourning the matters, the Court HELD: 1.1 It is necessary to appreciate the parties' intention when they agreed upon the arbitration clause in the contract. A plain reading of the arbitration clause suggests that the contracting parties intended: firstly, a settlement of their disputes or differences by arbitration in India through an arbitration panel of the Indian Council of Arbitration and in accordance with the Rules of Arbitration of the Indian Council of Arbitration, and secondly, if either of the contracting parties was in disagreement with the 'arbitration result' in India, then the aggrieved party would have a right to appeal to a second 83 B c D E F G H 84 A B c D E F G SUPREME COURT REPORTS [2016] 9 S.C.R. ai·bitration in London in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The result of the appellate arbitration would be binding on both the parties, subject to a legal challenge in accordance with law. The text of the arbitration clause is quite clear and explicit and does not admit of any doubt on its interpretation. The contracting parties intended Clause 14 of the contract to provide for two opportunities at resolving their disputes or differences. The first occasion would be a settlement by arbitration in lndia-'arbitration result' and the second occasion would be by arbitration in London, being in the nature of an appeal against the 'arbitration result' in India. [Para 6] (92-D-G]

1.2 While Clause 14 of the contract may have used the expression 'arbitration result' and not the expression 'arbitration award' clearly the parties' intention was that the 'arbitration result' would be an award or at least in the nature of an award rendered by the arbitration panel of the Indian Council of Arbitration. The proceedings before the arbitration panel were intended to be structured and held in accordance with the Rules of Arbitration of the Indian Council of Arbitration. The result of such proceedings would inevitably be an arbitration award, regardless of the nomenclature used by the parties. It is difficult to interpret the words 'arbitration result' other than meaning an arbitration award. [Para 7) (93-A-B] Comparative International Commercial Arbitration, Julian D. M. Lew, Loukas A. Mistelis, et al., (Kluwer Law International 2003) pp. 627-662; International Arbitration, Nigel Blackaby, Constantine Partasides, et al., Redfern and Hunter 6th edn (© Kluwer Law International; Oxford University Press 2015) pp. 501- 568; International Commercial Arbitration, Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman (Kluwer Law International 1999) pp. 735 - 780 - referred to.

1.3 The arbitration result in the instant case has all the elements and ingredients of an arbitration award. The 'arbitration result' in the first part of Clause 14 of the contract must mean an H arbitration award given by the arbitral panel of the Indian Council M/S CENTROTRADE MINERALS & METAL INC. v. HINDUSTAN COPPER LTD. of Arbitration. The plain language of Clause 14 specifically provides for a second arbitration, in the form of an 'appeal' against the award of the arbitratioJl panel of the Indian Council of Arbitration. Respondents submitted that the right to file an appeal can only be created by a statute and not by an agreement between the parties. This may be so in respect of litigation initiated in courts under a statute or for the enforcement of common law rights, but that does not prevent parties from entering into an agreement providing for non-statutory appeals so that their disputes and differences could preferably be settled without resort to court processes. [Paras 12, 14] [94-G; 95-A, C-El

2.1 Historically in India prior to the enactment of the A&C Act, two-tier arbitration was permissible. The significance of this is that Parliament must be assumed to have known the view of the UNCITRAL Working Group (of which India was a State member) and must be assumed to have known the decisions of various domestic courts and yet chose not to specifically prohibit the two-tier arbitration system. If that be so, this Court is entitled to proceed on the basis that even after the passage of the A&C Act, there can perhaps be no objection to the existence of a two-tier arbitration system. But this Court does not propose to base the decision on this assumption. It is, however, noted that there are several decisions rendered by the Bombay High Court that have accepted the two-tier arbitration system. There are several decisions of the Delhi High Court holding that since the A&C Act does not proscribe a two-tier arbitration procedure, such a system is acceptable. [Paras 19, 20] [97-B-C, D-FJ Dedhia Investments Pvt. Ltd. v. JRD Securities Pvt. Ltd. [2002) 104 (4) Born L.R. 932; Amin Merchant v. Bipin M. Gandhi 2005 (Suptll.) Arb. LR 337; Dhansukh K. Sethia v. Rajendra Capital Services Ltd. 2008 (1) Arb. L~l. 368 (~ombay); Dowell LeasinK & Finance Ltd. v. Radheshyam B. Khandelwal 2008 (1) Born C.R. 768; ANS Pvt. Ltd. v . .Jayesh R. Ajmera 2014 SCC Online Ilom 1825; Ankit Bimal Deorah v. Microsec Capital Ltd. 2015 SCC Online Born 4538; Steel Authority of India Ltd. v. Engineers Project Ltd. 2014 SCC Online Del 2314; U.P. Rajya Vidyut Utpadan Nigam Ltd. v. Union of India MANU/DE/3452/2015; Rakesh Kumar 85 A B c D E F G H 86 A B c D E F G SUPREME COURT REPORTS [2016] 9 S.C.R.