Tamil Nadu Electricity Board v. M/s.Videocon Power Limited, No.1601, Maker Chamber – V, Nariman Point, Mumbai-400 021 & Ors.

2.Canara Bank, No.787, Anna Salai, Chennai 600 002.3.Mr.Justice M.L.Pendse (Retd.,) Bhagyodya Building 2nd Floor, No.79, Nagindas Master Road, Mumbai 400 023.4.Mr.Justice S.Mohan (Retd.,) No.41, Venkatakrishna Iyer Road, R.A.Puram, Chennai 600 028.5.Mr.V.V.Veeder, Queen's Counsel, Essex Chambers, No.24, Lincoln's Fields, London WC 2A 3ED, England.... Respondents in O.S.A.No.271 of 2008Original Side Appeal No.270 of 2008 filed under 15 of lettersPatent r/w Order 36, Rule 1 of The Original Side Rules, praying toset aside the Common Order dated 09.06.2008 made in ReviewApplication No.5040 of 2004.Original Side Appeal No.271 of 2008 filed under 15 of lettersPatent r/w Order 36, Rule 1 of The Original Side Rules, praying toset aside the Common Order order dated 09.06.2008 made inO.P.No.624 of 2004.For Appellant in boththe original sideappeals : Mr.V.R.Reddy, SC for Mr.N.C.RameshFor Respondents in boththe original sideappeals: Mr.C.S.Vaidyanathan, SC for Mr.T.K.Bhaskar for R1 : Mr.T.C.A.Shrinivasan for R2 https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENTD.MURUGESAN,J.The unsuccessful petitioner in both the Review Application andOriginal Petition before the learned single Judge viz., the TamilNadu Electricity Board is the Appellant in these appeals.2. The following points arise for consideration in theseappeals (1) Whether the award under challenge is aforeign award or domestic award?(2) Whether the Original Petition filedunder Section 34 is maintainable if the award is aforeign award?(3) Whether the petition filed under section48 for enforcement of a foreign award ismaintainable before this Court?(4) Whether an appeal is maintainable againstthe award passed under Section 48 of TheArbitration and Conciliation Act, 1996?3. The following few facts are necessary for consideration ofthe above questions:(a) The Tamil Nadu Electricity Board (herein after referred toas "the Board") initiated North Madras Thermal Power Project(NMTPP). The said project was to be implemented in three stages.The Board itself completed the Stage-I. Initially, the Boarddecided to undertake Stage-II as well and leaving the execution ofStage-III for private promoters. Later on, it was decided by theGovernment of Tamil Nadu that the execution of stage-II could alsobe contracted out to private promoters and accordingly offers wereinvited from the independent power producers. On 04.10.1994, theGovernment of Tamil Nadu decided to entrust the Stage-II project tothe appellant M/s.Videocon Power Limited (in short, "VPL"). AMemorandum of Understanding was also signed on 25.10.1994 and theproject to be set up was 1 X 500 MW After the memorandum ofunderstanding was entered into, VPL requested the Board to considerthe increase in the capacity of the project from 1 X 500 MW to 2 x500 MW. The said request was accepted and a revised memorandum ofunderstanding dated 18.02.1995 was entered into. After the saidmemorandum of understanding, VPL had again submitted first of theirDraft Power Purchase Agreement (in short "PPA") only on17.07.1995. The Board appointed a committee on 19.01.1996 tofinalise the working arrangement for sharing of common facilitieswhich was an obligation under the memorandum of understanding. TheGovernment of Tamil Nadu recommended to the Central ElectricityAuthority for issue of Techno Economic Clearance of the project on19.03.1996 after emphasising three important conditions viz., (1)the project cost should not exceed Rs.4.007 Crores/MW; (2) VPL hasto absorb more than Rs.10 Crores towards sharing of common https://hcservices.ecourts.gov.in/hcservices/ facilities as the tentative cost worked out to Rs.206 Crores; and(3) VPL has to erect a 400 KV gas insulated sub-station, in view ofspace constraint.(b) VPL took possession of the project site land on 28.03.1996and the Central Electricity Authority cleared the Techno EconomicClearance of the project on 03.04.1996 subject to some conditions.When VPL requested the Board on 24.10.1996 to initial the DraftPower Purchase Agreement to enable the Company to kick off theinitial tie-up, the Board did not initial the Power PurchaseAgreement (PPA) since VPL in its letter dated 24.06.1996 had statedthat it is expected to have a few changes in the PPA after itspreliminary discussion with the Indian Financial Institution andForeign Banks. Subsequently, there were some correspondences,which ultimately resulted in a dispute between VPL and the Board.In the Board meeting held on 08.08.2000 it was found that VPL hadnot attained financial closure and the time had expired for suchfinancial closure and hence the Board decided to withdraw escrowcover from VPL and to allot two covers to another named IndependentPower Producers under different projects. Hence, a dispute arosebetween VPL and the Board. In terms of arbitral agreement, thedispute was referred for arbitration consisting of threeArbitrators. VPL appointed Mr.Justice M.L.Pendse (Retd.,) and Boardappointed Mr.Justice S.Mohan (Retd.,). Mr.V.V.Veeder, Queen'sCounsel, Essex Chambers, London, England was appointed as thirdArbitrator as the Chairman, the Secretary General of PermanentCourt of Arbitration, Hague. The arbitral proceedings wereconducted in Singapore followed by one sitting in Hong Kong on08.12.2001. There was a claim at the instance of VPL and a counterclaim at the instance of the Board. A partial interim award waspassed by the arbitral Tribunal on 08.08.2001 at the time when theTribunal sat in Singapore.(c) The arbitral Tribunal passed its final award on21.06.2004 and while rejecting the VPL's claim for declaratoryrelief, allowed the claim for damages with legal and arbitrationcosts and at the same time rejected the counter claim of the Boardin the very same arbitral award. (d) Invoking Sections 44, 47 and 49 of The Arbitration andConciliation Act, 1996 (hereinafter referred to as "the Act") VPLfiled an execution petition for enforcement of the award dated21.06.2004. Though the said petition was not initiallyentertained by the Registry on certain objections as to themaintainability, by order of this Court dated 09.12.2004, suchpetition was entertained as it was maintainable and a prohibitoryorder against the Garnishee Bank was also issued. A reviewapplication filed at the instance of the Board to review the Orderdated 09.12.2004 on the ground that even before the ExecutionPetition was filed, the Board had filed a petition on 15.07.2004under Section 34 of the Act to set aside the award dated 21.06.2004and the petition was admitted by this Court on 05.11.2004. https://hcservices.ecourts.gov.in/hcservices/ (e) By a subsequent order dated 30.12.2004, this Courtordered that a portion of the prohibitory order with regard to theGarnishee will be suspended for one month and the Board wasdirected to furnish security for the entire award amount and thereview application was adjourned. Thereafter, the ExecutionPetition was also numbered and both the Execution Petition filed byVPL as well the Petition filed by the Board to set aside the awardwere taken up together and were disposed of by Common Order dated09.06.2008 which is impugned in these appeals. 4. We have heard Mr.V.R.Reddy,learned senior counsel forMr.N.C.Ramesh learned counsel for the appellant Board,Mr.C.S.Vaidyanathan, learned senior counsel for Mr.T.K.Bhaskar forVPL, the first respondent and Mr.T.C.A.Shrinivasan, learnedcounsel for the Bank, the second respondent in both the appeals.5.1) MR.V.R.Reddy, learned senior counsel for the appellantBoard would submit that the award in question is not a foreignaward and it is a domestic award inasmuch as the two members havesigned the award in Chennai where it was pronounced and in suchevent, petition under Section 34 of the Act to set aside the awardis maintainable before this Court. He would further submit that thearbitral award is not a foreign award as envisaged under Section44 of the Act and inasmuch as the award is domestic award, Part Iof the Act would apply and in such case, petition under Section 34of the Act to set aside the award is maintainable. He would furthersubmit that the learned Judge has erred in not only coming to theconclusion that the award in question is a foreign award, but alsoPart I of the Act is not applicable and consequently, petitionunder Section 34 of the Act is not maintainable. The learnedsenior counsel would heavily rely upon the judgement reported inVenture Global Engineering v. Satyam Computer Services Ltd., andanother (2008) 4 SCC 190 and contend that even in case of aforeign award, Part I of the Act is applicable.5.2) He would also submit that the learned Judge ought not tohave entertained the application under Section 48 of the Act filedat the instance of the Company for enforcement of the Award bytreating the award as a foreign award. The learned senior counselwould extensively take us to Clause 17 of the Power PurchaseAgreement and the various provisions of the Act in support of hissubmissions. 6.1) Mr.C.S.Vaidyanathan, learned senior counsel for the firstrespondent (VPL) would submit diametrically opposite to thearguments made by the learned senior counsel for the appellant. Hewould submit that in terms of Clause 17(a) and (b) of the PPA, thedispute shall be settled by arbitration conducted in accordancewith United Nation Commission on International Trade Law(UNCITRAL) and the arbitration shall be held in Singapore and thearbitral proceedings shall be conducted and the award shall berendered in English language. https://hcservices.ecourts.gov.in/hcservices/

6.2) He would also submit that the Clause 17.3 (c) of the PPAcontemplates that the validity, interpretation, construction,performance and enforcement of the arbitration agreement and anyother question of arbitration law shall be governed by the laws ofEngland. In fact, the entire arbitration proceedings wereconducted only in Singapore except only one sitting in Hong Kongand the award was passed only in Singapore, a convention countryand therefore, the award in question is a foreign award and insuch case, Part I of the Act has no application and consequentlypetition under Section 34 of the Act is not maintainable. Hewould submit that as the parties have expressly agreed to excludepart I of the Act, the judgement of the Apex Court rendered inM/s.Venture Global Engineering case is not applicable to the factsof the present case.6.3) He would further submit that in terms of clause 17.3 (e)of the Agreement, it was agreed that the award could be enforcedby the party against the assets of other party, wherever thoseassets are located and such award could be enforced into any Courtor Tribunal of competent jurisdiction. As the parties hadsubmitted to jurisdiction of this Court, insofar as theenforcement of the award including a foreign award, petitionunder Part II of Section 48 of the Act seeking for enforcement ofthe arbitral award is maintainable. 6.4) He would further submit that in any case, as against theorder of the learned Judge holding that such a petition seeking toenforce the award is maintainable second appeal is specificallyexcluded under Section 50(2) of the Act. Hence, the provisions ofappeal under Letters Patent is not available to the appellant, inview of the judgement in The Union of India v. Mohindra SupplyCo., AIR 1962 SC 256 and P.S.Sathappan (Dead) by LRs v. Andhra BankLimited and others AIR 2004 SCC 5152.7. For a decision on the above submissions, the relevantclauses of the Power Purchase Agreement and the relevant provisionsof the Act are referable. 8.1) Clause 17 of the Agreement reads as under:(a) The Dispute shall be settled byarbitration conducted in accordance with the UnitedNations Commission and Internal Trade Law(UNCITRAL) as in effect on the date of thisAgreement (the "Rules). The Arbitration shall beheld in Singapore. The arbitration proceedingsshall be conducted, and the award shall berendered,in the English language.(b) There shall be three arbitrators of whomeach Party shall select one. The two arbitratorsthus appointed shall select the third (3rd)arbitrator to act as Chairman )but not umpire) of https://hcservices.ecourts.gov.in/hcservices/ the Arbitral Tribunal within thirty (30) days ofthe selection of the second arbitrator. If theparty does not select an arbitrator where it isentitled to do so within thirty (3) days of arequest for arbitration by Party or if the twoparty appointed arbitrators fail to agree on athird (3rd) arbitrator, the Secretary General of thePermanent Court of Arbitration at The Hague shallmake such appointment.(c) Notwithstanding the terms of Article 18.8hereof, the validity, interpretation, construction,performance and enforcement of the arbitrationagreement contained in this Article 17.3, theconduct of the arbitration (including any resort toa Court for provisional remedy), the enforcement ofany Award and any other question of arbitration lawshall be governed by the laws of England. Theparties expressly acknowledge and agree that anyAward under this Article 17.3 shall be subject tothe New York Convention on the Recognition andEnforcement of Foreign Arbitral Awards, 1958.(d) The Award under this Article 17.3 shall befinal and binding upon the parties and shall be thesole and exclusive remedy between the Partiesregarding all disputes. Any rights of appealavailable at law may be exercised by a Party only(i) after the Award has been fully implementedunder this Article 17.3, or (ii) if such party mustpay an amount under such Award, after such partyhas either deposited the amount of the award in theCourt or tribunal of competent jurisdiction.(e) The Parties agree that any Award may beenforced by a Party against the assets of the otherParty where ever those assets are located and suchAward may be enforced into any Court or Tribunal ofcompetent jurisdiction of any such Courts orTribunal in India. (f) to (j) ..........8.2) Clause 18 of the Power Purchase Agreement reads asunder:-18.8. Governing Law: Except as provided inArticle 17.3 hereof, this Agreement and the rightsand obligations hereunder shall be interpreted,construed and governed by the substantive laws ofIndia, without regard to its principles of conflictof laws that might require the application of thelaw of any other jurisdiction. 8.3) Sections 2(2), 34, 35, 36, 37, 44, 46, 48, 49 and 50 ofthe Act read thus:- https://hcservices.ecourts.gov.in/hcservices/ A.2. Definitions. - (1) In this Part, unless thecontext otherwise requires, - (a) to (h) .......(2) This Part shall apply where the place ofarbitration is in India. (3) to (9) ..... B.34. Application for setting asidearbitral award. – (1) Recourse to a courtagainst an arbitral award may be made only by anapplication for setting aside such award inaccordance with sub-section (2) and subsection (3).(2) An arbitral award may be set aside by thecourt only if- (a) The party making theapplication furnishes proof that-(i) A party was under some incapacity, or (ii) The arbitration agreement is not validunder the law to which the parties have subjectedit or, failing any indication thereon, under thelaw for the time being in force; or (iii) The party making the application was notgiven proper notice of the appointment ofan arbitrator or of the arbitral proceedings or wasotherwise unable to present his case; or (iv) The arbitral award deals with adispute not contemplated by or not falling withinthe terms of the submission to arbitration, or itcontains decisions on matters beyond the scopeof the submission to arbitration:Provided that, if the decisions on matterssubmitted to arbitration can be separated fromthose not so submitted, only that part of thearbitral award which contains decisions on mattersnot submitted to arbitration may be set aside; or (v) The composition of the arbitraltribunal or the arbitral procedure was not inaccordance with the agreement of the parties,unless such agreement was in conflict with aprovision of this Part from which the partiescannot derogate, or, failing such agreement, wasnot in accordance with this Part; or https://hcservices.ecourts.gov.in/hcservices/ (b) The court finds that-(i) The subject-matter of the dispute is not capable ofsettlement by arbitration under the law for the time being inforce, or(ii) The arbitral award is in conflict with thepublic policy of India. C.35. Finality of arbitral awards. -Subject tothis Part an arbitral award shall be final andbinding on the parties and persons, claiming underthem respectively.D.36. Enforcement. - Where the time for making anapplication to set aside the arbitral award undersection 34 has expired, or such application havingbeen made, it has been refused, the award shall beenforced under the Code of Civil Procedure, 1908 (5of 1908) in the same manner as if it were a decreeof the court.E.37. Appealable orders. – (1) An appeal shalllie from the following orders (and from no others)to the court authorised by law to hear appealsfrom original decrees of the court passing theorder, namely: - (a) Granting or refusing to grantany measure under section 9; (b) Setting aside or refusing toset aside an arbitral award under section 34. (2) An appeal shall also lie to a courtfrom an order of the arbitral tribunal-- (a) Accepting the plea referredto in sub-section (2) or sub-section (3) of section16; or (b) Granting or refusing togrant an interim measure under section 17. (3) No second appeal shall lie from anorder passed in appeal under this section, butnothing in this section shall affect or take awayany right to appeal to the Supreme Court.F.44. Definition. -In this Chapter, unless thecontext otherwise requires, “foreign award” meansan arbitral award on differences between persons https://hcservices.ecourts.gov.in/hcservices/ arising out of legal relationships, whethercontractual or not, considered as commercial underthe law in force in India, made on or after the11th day of October, 1960- (a) In pursuance of an agreement in writingfor arbitration to which the Convention set forthin the First Schedule applies, and (b) In one of such territories as the CentralGovernment, being satisfied that reciprocalprovisions have been made may, by notification inthe Official Gazette, declare to be territories towhich the said Convention applies.G.46. When foreign award binding. - Any foreignaward which would be, enforceable under thisChapter shall be treated as binding for allpurposes on the persons as between whom it wasmade, and may accordingly be relied on by any ofthose persons by way of defence, set off orotherwise in any legal proceedings in India and anyreferences in this Chapter to enforcing a foreignaward shall be construed as including references torelying on; an award.H.48. Conditions for enforcement of foreignawards. – (1) Enforcement of a foreign award may berefused, at the request of the party against whom itis invoked, only if that party furnishes to thecourt proof that-(a) The parties to the agreement referred to insection 44 were, under the law applicable to them,under some incapacity, or the said agreement is notvalid under the law to which the parties havesubjected it or, failing any indication thereon,under the law of the country where the award wasmade; or (b) The party against whom the award is invokedwas not given proper notice of the appointment ofthe arbitrator or of the arbitral proceedings or wasotherwise unable to present his case; or(c) The award deals with a difference notcontemplated by or not falling within the terms ofthe submission to arbitration, or it containsdecisions on matters beyond the scope of thesubmission to arbitration:Provided that, if the decisions on matterssubmitted to arbitration can be separated from those https://hcservices.ecourts.gov.in/hcservices/ not so submitted, that part of the award whichcontains decisions on matters submitted toarbitration may be enforced; or(d) The composition of the arbitral authorityor the arbitral procedure was not in accordance withthe agreement of the parties, or, failing suchagreement, was not in accordance with the law of thecountry where the arbitration took place; or(e) The award has not yet become binding on theparties, or has been set aside or suspended by acompetent authority of the country in which, orunder the law of which, that award was made.(2) Enforcement of an arbitral award may alsobe refused if the court finds that-(a) The subject-matter of the difference isnot capable of settlement by arbitration under thelaw of India; or(b) The enforcement of the award would becontrary to the public policy of India. Explanation. -Without prejudice to thegenerality of clause (b) of this section, it ishereby declared, for the avoidance of any doubt,that an award is in conflict with the public policyof India if the making of the award was induced oraffected by fraud or corruption.(3) If an application for the setting aside orsuspension of the award has been made to acompetent authority referred to in clause (e) ofsub-section (1) the court may, if it considers itproper, adjourn the decision on the enforcement ofthe award and may also, on the application of theparty claiming enforcement of the award, order theother party to give suitable security.I.49. Enforcement of foreign awards. -Where thecourt is satisfied that the foreign award isenforceable under this Chapter, the award shall bedeemed to be a decree of that court. J.50. Appealable orders. – (1) An appeal shalllie from the order refusing to- (a) Refer the parties to arbitration undersection 45;(b) Enforce a foreign award under section 48,to the court authorised by law to hear appeals fromsuch order. https://hcservices.ecourts.gov.in/hcservices/ (2) No second appeal shall lie from an orderpassed in appeal under this section, but nothing inthis section shall affect or take away any right toappeal to the Supreme Court.Point Nos. 1 & 2:-9.1) To determine the above questions, the clauses in thePower Purchase Agreement containing arbitration are relevant. Interms of clause 17.3 (a) of the agreement, the parties have agreedto settle the dispute by arbitration conducted in accordance withUnited Nation Commission on International Trade Law (UNCITRAL). Theparties have also agreed that the arbitration shall be held inSingapore and the arbitration proceedings shall be conducted andthe award shall be rendered in English language. In terms ofClause 17.3 (c) of the Agreement, the parties have also agreed thatthe validity, interpretation, construction, performance andenforcement of the agreement contained in Clause 17.3 of theagreement, the conduct of arbitration (including any resort to aCourt for provisional remedy) the enforcement of any award and anyother question of arbitration law shall be governed by the Laws ofEngland. A conjoint reading of both the above clauses would showthat the intention of the parties to the Power Purchase Agreementis that the award proceedings shall be outside India therebymeaning that such an award would only be a foreign award. By Clause17.3 (a) of the PPA, the parties have agreed to settle the disputeby arbitration conducted in accordance with UNCITRAL. The partieshave also agreed for the arbitration to be held in Singapore andthe language is English.By clause 17.3 (b) of the PPA, the partieshave also agreed to select one arbitrator each leaving theappointment of the third arbitration to the Secretary General ofthe Permanent Court of Arbitration, the Hague. Factually bothparties have nominated their respective arbitrators and the thirdarbitrator namely, the Chairman was appointed by the SecretaryGeneral of the Permanent Court of Arbitration, The Hague and almostall the sittings were held in Singapore, except for once in HongKong. 10. Section 44 of the Act defines a foreign award meaningthereby unless the context otherwise requires, "foreign award"means an arbitral award on differences between persons arising outof legal relationships,whether contractual or not, considered ascommercial under the law in force in India.11. The submission of Mr.V.R.Reddy, the learned senior counselfor the appellant Board is that the agreement was entered into inIndia and that the two arbitrators have signed in India thereby theaward could be considered to be one of domestic award. We find noforce in the said contention as the Court while deciding thequestion as to whether the award was a foreign award or domesticaward, must keep in mind the agreement as such and in the absenceof any provision in the agreement either contrary to the arbitral https://hcservices.ecourts.gov.in/hcservices/ proceedings in India or arbitrators to sign the award in India,merely because either arbitral proceedings conducted in India orthe arbitrators have signed the award in India would by themselvesnot make arbitral award as a domestic award. Such a conclusionwould be contrary to the intention of the parties as contained inthe agreement. 12. To determine, as to whether the award is a foreign award,the relevant test would be, firstly, the relationship between theparties must be commercial; secondly, the award must be made inpursuance of the agreement in writing; and thirdly, the award mustbe made in convention country. As far as the legal relationshipbetween the parties is concerned, there is no dispute that thecontract is commercial and the parties have commercialrelationship. The Award was passed pursuant to the agreement inwriting since after the dispute had arisen both the parties havenominated two arbitrators in terms of Clause 17.3 (b) of the PPAand the third arbitrator viz., The Chairman was appointed by theSecretary General of the Permanent Court of Arbitrator, The Hague.Therefore, the further relevant test to arrive at a conclusion inrespect of a "foreign award" would be first, the intention of theparties; secondly whether the arbitral proceedings were conductedstrictly in accordance with the PPA. Thirdly, as to whether theaward was to be made in a convention country. Factually in thiscase, the arbitral proceedings were conducted in conventioncountries viz., in Singapore except for one sitting in Hong Kong. 13. In Bhatia International case, while holding that even incase of a foreign award, Part I of the Act could be madeapplicable, the Apex Court has, in fact, held that the parties tothe agreement can exclude the provisions of Part I of the Act incase of International Commercial Arbitrations including those thattake place outside India. Hence, we have no hesitation to hold thatthe award in question is a foreign award.14. This takes us to the next question, as to whether aforeign award could be challenged in exercise of the powers underpart I of Section 34 of the Act. Much reliance was placed byMr.V.R.Reddy, on the judgement reported in Venture GlobalEngineering case. Before the Apex Court, the earlier judgement inBhatia International case was heavily relied upon. In VentureGlobal Engineering case, the Apex Court had quoted the case ofBhatia International Limited case, (2002) 4 Supreme Court 105 withapproval. In the said judgement, it has been held that even aforeign award could be challenged under Part I of Section 34 of theAct.15.1) For appreciation of the submissions made byMr.V.R.Reddy, Senior Counsel, both the above judgements of the ApexCourt are to be carefully considered. In Bhatia International casethe Apex Court was considering the impact of exclusion of the powerto challenge a foreign award in exercise of power under Part-I of https://hcservices.ecourts.gov.in/hcservices/ the Act and had ultimately held that even a foreign award could bechallenged under Part I of the Act. While holding that theparties by agreement cannot over-ride or exclude the non derogableprovisions of Part I in such arbitration in para 21 the Apex Courthad observed thus:21. Now let us look at sub-sections (2), (3),(4) and (5) of Section 2. Sub-section (2) ofSection 2 provides that Part I would apply wherethe place of arbitration is in India. To beimmediately noted, that it is not providing thatPart I shall not apply where the place ofarbitration is not in India. It is also notproviding that Part I will 'only' apply where theplace of arbitration is in India (emphasissupplied). Thus the legislature has not providedthat Part I is not to apply to arbitrations whichtake place outside India. The use of the languageis significant and important. The legislature isemphasizing that the provisions of Part I wouldapply to arbitrations which take place in India,but not providing that the provisions of Part Iwill not apply to arbitrations which take placeout of India. The wording of sub-section (2) ofSection 2 suggests that the intention of thelegislature was to make provisions of Part Icompulsorily applicable to an arbitration,including an international commercial arbitration,which takes place in India. Parties cannot, byagreement, override or exclude the non-derogableprovisions of Part I in such arbitrations. Byomitting to provide that Part I will not apply tointernational commercial arbitrations which takeplace outside India the effect would be that PartI would also apply to international commercialarbitrations held out of India. But by notspecifically providing that the provisions of PartI apply to international commercial arbitrationsheld out of India, the intention of thelegislature appears to be to ally (sic allow)parties to provide by agreement that Part I or anyprovision therein will not apply. Thus in respectof arbitrations which take place outside Indiaeven the non-derogable provisions of Part I can beexcluded. Such an agreement may be express orimplied."15.2) Further in the very same judgement, the Apex Court inpara 32 had observed thus:32. To conclude, we hold that the provisionsof Part I would apply to all arbitrations and toall proceedings relating thereto. Where such https://hcservices.ecourts.gov.in/hcservices/ arbitration is held in India the provisions ofPart I would compulsorily apply and parties arefree to deviate only to the extent permitted bythe derogable provisions of Part I. In cases ofinternational commercial arbitrations held out ofIndia provisions of Part I would apply unless theparties by agreement, express or implied, excludeall or any of its provisions. In that case thelaws or rules chosen by the parties would prevail.Any provision, in Part I, which is contrary to orexcluded by that law or rules will not apply."16. A careful scrutiny of the Judgement in BhatiaInternational Company's case would show that though a foreign awardcould be questioned under Part I of the Act, the parties are atliberty either expressly or impliedly to exclude all or any ofits provisions and if such exclusion is made in the agreement forthe applicability of part-I of the Act as regards to the foreignaward, certainly, such a foreign award cannot be challenged underPart-I of the Act (i.e.,) by filing petition under Section 34 ofthe Act. 17. The above law laid down by the Apex Court has been quotedwith approval by the subsequent Judgement in Venture GlobalEngineering case. Hence, the real test to find out as to whether aforeign award could be challenged under Part I of the Act, dependsupon the terms of the agreement. As we have already held that interms of clause 17.3 of the Power Purchase Agreement, the award inquestion is a foreign award and in terms of clauses 17.3 (a), (b)and (c) of the Agreement, the parties have agreed to exclude Part-Iof the Act and therefore, on given facts of the present case, thepetition under Part-I of Section 34 of the Act under Part-I of theAct, is not maintainable. This is fortified by clause 18.8 of thePower Purchase Agreement, which states that except as provided inClause 17.3 of the PPA and the rights and the obligations thereofshall be interpreted, constructed and governed by the substantivelaws of India. By that clause, the parties have agreed for theapplicability of substantive law of India only in such of thosecases not covered by clause 17.3 of the PPA. The intention of theparties are clear that the law in respect of the arbitralproceedings are governed only by clause 17.3 of the PPA relating toa foreign award. There is one more aspect that even in BhatiaInternational case, the Apex Court had drawn a distinction whileconsidering the award as to whether it is a foreign award ordomestic award. While holding that Part I also can be madeapplicable in respect of foreign awards one of the test would besuch international commercial arbitration may be held in nonconvention country. In the event, such arbitration is held in aconvention country, like the one on hand, Part-II of the Act wouldalone apply to the arbitration. For all the above reasons we findthat on facts of this case, the award being a foreign award and thearbitral proceedings were held in convention countries and the https://hcservices.ecourts.gov.in/hcservices/ parties have agreed for such arbitral proceedings, the challenge tosuch foreign award is not maintainable under Part-I of the Act.Point Nos.1 and 2 are answered accordingly. Point Nos.3 and 4:- 18. Though both the appeals question the order rejecting theOriginal Petition filed under Section 34 of the Act andconsequently the order in dismissing the Review Application, inview of the rival contentions we are inclined to consider the pointNos.3 and 4 as well.19. Mr.V.R.Reddy, learned senior counsel for the appellantBoard has submitted that the Execution Petition itself is notmaintainable since the Part I of the Act alone would apply. 20. Per contra Mr.C.S.Vaidyanathan, learned senior counsel forthe first respondent (VPL) has submitted that inasmuch as theaward in question is a foreign award, Part II of the Act alone isapplicable and in any case, the order passed under Section 48 ofthe Act cannot be questioned by way of second appeal. 21. In view of the rival contentions we are inclined to dealwith those contentions as well while we decide both the point Nos.3 & 4.Point No.3:-22. In terms of Clause 17.3 (e) of the Power PurchaseAgreement, the parties have agreed that any award may be enforcedby a party against the assets of the other party wherever thoseasses are located and such award may be enforced into any Court orTribunal of competent jurisdiction. The parties have expresslysubmitted themselves to the jurisdiction of any such Courts orTribunals in India. 23. The portion of clause 17.3 (3) of the PPA has already beenextracted in the earlier part of this Order. VPL would certainlybe entitled to approach this Court for enforcement of such foreignaward and therefore, the petition for enforcement of such foreignaward in terms of the PPA between the parties.24. In this context, it may also be relevant to refer thefollowing provisions. Section 44 of the Act, defines "foreignaward". Section 46 of the Act contemplates that any foreign awardwhich would be enforceable under Chapter I of Part II of the Act,shall be treated as binding for all purposes on the persons asbetween whom it was made. 25. Under sub-section (1) of section 48 of the Act, the Courtmay refuse to enforce a foreign award at request of the partyagainst whom it is invoked, only if that party furnishes to theCourt the proof. Clauses (a) to (e) of the sub-section of section48 of the Act relates to such proof. The Board has not questioned https://hcservices.ecourts.gov.in/hcservices/ the enforcement of the award and consequently requested for refusalon any one of the grounds thereon. That apart under sub-section(2) of section 48 of the Act, the Court may also refuse to enforcean arbitral award, if the Court finds that the subject matter ofthe difference is not capable of settlement by arbitration underthe law of India or enforcement of the award would be contrary tothe public policy of India. None of the grounds are urged before usto challenge the petition filed seeking for enforcement of thearbitral award. Though the petition was questioned before thelearned single Judge on the ground of public policy as well, as wehave held that the petition under Section 34 of the Act is notmaintainable, we are not inclined to consider the question ofchallenge as to the enforcement of the award on the ground that itis contrary to the public policy. Hence, for all the abovereasons, VPL is entitled to seek for enforcement of the awardbefore this Court. The Point No.3 is answered accordingly.Point No.4:-26. Section 49 of the Act contemplates that when once theCourt is satisfied that a foreign award is enforceable under PartII of the Act, such award shall be deemed to be a decree of thatCourt. Any order passed under Section 48 of the Act in refusing toenforce a foreign award could be questioned by way of appeal underclause (a) of sub-section (1) of section 50 of the Act. UnderClause (b) of sub-section (1) of section 50 of the Act, an appealis also provided in respect of any order refusing to refer theparties to arbitration under Section 45 of the Act. Sub-section 2of section 50 of the Act contemplates that no second appeal shalllie from an order passed in appeal under this Section, except aright of appeal to the Supreme Court. It is the contention ofMr.C.S.Vaidyanathan, learned senior counsel for the firstrespondent (VPL) that inasmuch as the provisions of appeal areavailable only in respect of the person who approaches this Courtfor enforcement of a foreign award and in case such petition isrefused, he could prefer an appeal and in case, the appeal is alsorejected, there is no second appeal. The said section does notcontemplate any right on the appellant Board to prefer an appeal.He would also submit that in the light of the Judgement in TheUnion of India v. Mohindra Supply Co., AIR 1962 SC 256 andP.S.Sathappan (Dead) by LRs v. Andhra Bank Limited and others, anappeal under Letters Patent is not maintainable.27. In State of West Bengal v. Gourangalal Chatterjee, (1993)3 SCC 1, the Apex Court while dealing with the similar provisionsof appeal under Section 39 of The Arbitration and ConciliationAct, 1940 has held that no appeal lies against the order of thesingle Judge of a High Court revoking the authority to appoint anarbitrator. The Apex Court had, in fact, relied upon the judgementin The Union of India v. Mohindra Supply Co., AIR 1962 SC 256.Subsequently, having noticed another judgement of the Apex Court inVinta M.Khanolkar vs. Branga M.Pai taking contrary view relyingupon Clause 15 of the Letters Patent applicable to the High Court https://hcservices.ecourts.gov.in/hcservices/ of Bombay, the issue was referred to a larger Bench in Orma Impex(P) Limited v. NISSAI ASB PTE. Ltd., (1999) 2 SCC 541.28. Be that as it may, in a subsequent judgement in ShyamaCharan Agarwala & sons v. Union of India, (2002) 6 SCC 201, whileholding that section 39 of the Arbitration Act, 1940 is restrictedin its application only in respect of certain types of ordersappealable, the Apex Court found that being special statute, noappeal can be entertained except under Section 39 of theArbitration Act, 1940.29. To the question as to whether such appeal could beentertained under the provisions of Clause 15 of the LettersPatent, the answer is the Judgement of the Apex Court in TheUnion of India v. Mohindra Supply Co., AIR 1962 SC 256. In para 5,the Apex Court held thus:-"5. .... Under S.39(1), an appeal lies from theorders specified in that sub-section and from noothers. The legislature has plainly expressed itselfthat the right of appeal against the orders passedunder the arbitration Act may be exercised only inrespect of certain orders. The right to appealagainst other orders is expressly taken away. If bythe express provision contained in S.39(1), a rightto appeal from a judgement which may otherwise beavailable under the Letters Patent is restricted,there is no ground for holding that cl. (2) does notsimilarly restrict the exercise of appellate powergranted by the Letters Patent. If for reasonsaforementioned the expression "second appeal"includes an appeal under the Leters Patent, it wouldbe impossible to hold that notwithstanding theexpress prohibition, an appeal under the LettersPatent from an order passed in appeal under sub-s(1) is competent."30. The said judgement was quoted with approval inP.S.Sathappan (Dead) by LRs v. Andhra Bank Limited and others AIR2004 SCC 5152. In that judgement the Apex Court was considering theprovisions of section 104 of CPC and it was held that an appealprovided under the Letters Patent of the High Court is an appealprovided by a law for the time being in force as such an appeal isexpressly saved. In P.S.Sathapan's case the Apex Court in para 71and 72 has held thus:- "71. The Letters Patent although is asubordinate legislation but nevertheless would be alaw within the meaning of Articles 225 and 372 ofthe Constitution of India, but the same cannotprevail over a Legislative Act, if clause 44 of theLetters Patent is to be given a proper meaning.The provisions of Letters Patent despiteattainment of independence by India are saved by https://hcservices.ecourts.gov.in/hcservices/ Section 106 of the Government of India Act, 1919,Section 223 of the Government of India Act, 1935,Clause 2(1) of India (Adaptation of Existing Laws)Order, 1949 and Section 18(3) of the IndependenceAct, 1947. Letters Patent, thus, wouldundoubtedly come within the meaning of existing lawbut the status thereof cannot be higher than thatof the statute made law. Not only in terms ofClause 44 of the Letters Patent, but having regardto the fact that the same is a subordinatelegislation, it would be subject to laws made by acompetent legislature.72. The Letters Patent is not a statutoryenactment although it has the force of law. Clause44 of the Letters Patent in no uncertain termsstates that the provisions thereof would be subjectto the legislative powers of the Governor-Generalin Legislative Council, and also of the GovernorGeneral-General in Council under Section 71 of theGovernment of India Act, 1915."31. Section 37 of the Act deals with the provision of appealwhen the challenge is made in respect of a domestic award. Sub-section (1)of section 37 of the Act contemplates a provision ofappeal against the order granting or refusing to grant any interimmeasure under Section 9 of the Act, setting aside or refusing to setting aside an arbitral Award under Section 34 of the Act. Sub-section (2) of section 37 of the Act also contemplates a provisionof appeal to the Court from an order of the arbitral Tribunalaccepting the plea referred to in sub-section (2) or (3) of section16 of the Act or granting or refusing to grant an interim measureunder Section 17 of the Act. By that section only one provision ofappeal is made to the Court. Sub-section 3 of section 37 of the Actbars a second appeal from an order in appeal and a provision ofsecond appeal to the Supreme Court was made available. Sub-section(2) of section 50 of the Act is a similar provision relating to thesecond appeal as contained in sub-section (3) of section 37 of theAct. Section 39 of the Arbitration Act, 1940 has a similarprovision and therefore the above Judgement rendered by the ApexCourt would be equally applicable to the provision of Section 50 ofthe Act. 32. Inasmuch as sub section (1) of section 50 of the Act isavailable only against the order refusing to refer the parties toarbitration under section 45 of the Act and an order refusing toenforce a foreign award under Section 48 of the Act, no secondappeal is contemplated in view of sub section 2 of section 50 ofthe Act. [See - Shyama Charan Agarwala & sons v. Union of India,(2002) 6 SCC 201]. However, sub section 2 of section 50 of the Act,empowers a right on the parties aggrieved to approach the SupremeCourt. The said section by virtue of its specific provision https://hcservices.ecourts.gov.in/hcservices/ provides for second appeal only to the Supreme Court in respect ofan order allowing the petition for enforcement of a foreign award.It must be construed that the provisions of Clause 14 of theLetters Patent is excluded. Hence, the provisions of Letters Patentcannot prevail over a Legislative Act. When there is a specificenactment contemplating a provision for appeal to the SupremeCourt in respect of an order passed under Section 48 of the Act,the appeal under 15 of Letters Patent is not certainlymaintainable. Accordingly, Point NO.4 is answered. 29. For all our above discussions and conclusions, we holdthat the award in question is a foreign award and the same cannotbe questioned under Section 34 of Part-I of the Act. In terms ofClause 17.3(e)of the Power Purchase Agreement, VPL, the 1strespondent Company is entitled to approach this Court forenforcement of such foreign award. As against the order inExecution Petition, second appeal is not maintainable under Clause15 of the Letters Patent. In view of the above findings,both the appeals are dismissed. However, considering thecircumstances, there will be no costs. Consequently, connected MPsare closed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.kmkTo1.The Sub Assistant Registrar(Original Side)High Court, Madras1 cc to Mr.T.C.A. Srinivasan, Advocate, Sr. 43182 ccs to Mr.N.C. Ramesh, Advocate, SR. 35021 cc to Mr.T.K. Bhaskar, Advocate, SR. 3844Original Side AppealNos.270 &271 of 2008KU (CO)kk 2/2