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HIGH COURT OF DELHI
O.M.P. (COMM) 26/2023, I.A. 1260/2023, I.A. 1261/2023 and
THE CHIEF EXECUTIVE OFFICER J AND K ERA SRINAGAR KASHMIR THROUGH AUTHORISED
REPRESENTATIVE ABDUL KHALIQ QURESHI PROJECT MANAGER .....Petitioner
Through: Mr. Praveen Chauhan, Ms. Malvica Satija, Mr. Sarthak Sawhney and
Mr. Parth Awasthi, Advs.
Through: Mr. Aditya Sikka and Ms. Onshi, Advs.
JUDGMENT
06.08.2024
1. An issue of some import, which is in a sense sui generis, has been raised by Mr Praveen Chauhan, learned Counsel for the petitioner in this case.
2. Mr Chauhan advances, as a preliminary ground of challenge to the impugned award, the contention that the learned arbitrator in the present case erred in proceeding with the arbitration in terms of the Arbitration and Conciliation Act, 1996[1]. His contention is that the “the 1996 Act” hereinafter arbitration was required to be conducted in accordance with the Jammu and Kashmir Arbitration Act, 1997[2].
3. Mr. Chauhan bases his submission essentially on two covenants in the Contract Agreement dated 1 September 2014 executed between the parties, in terms whereof, admittedly, the arbitral proceedings were conducted.
4. The first clause on which Mr. Chauhan places reliance is Clause 20.6, specifically sub-clause (b) thereof, which reads thus: “20.[6] Arbitration Any dispute between the Parties arising out of or in connection with the Contract not settle amicably in accordance with Sub- Clause 20.[5] above and in respect of which the DB's decision (if any) has not become final and binding shall be finally settled by arbitration. Arbitration shall be conducted as follows: ***** (b) if the Contract is with domestic contractors, arbitration with proceedings conducted in accordance with the laws of the Employer’s country. The place of arbitration shall be the neutral location specified in the Contract Data; and the arbitration shall be conducted in the language for communications defined in Sub-Clause 1.[4] [Law and Language].” The “employer’s country”, Mr Chauhan submits, is, indisputably, India.
5. Proceeding therefrom, Mr Chauhan places reliance on the “the J & K Arbitration Act” hereinafter proviso to Section 1(2)3 of the 1996 Act, which was in existence at the time of execution of the Contract Agreement, though it was specifically deleted from the statute by Sections 95 and 96 of the Arbitration and Conciliation (Amendment) Act, 2019, with effect from 31 October 2019.
6. Mr. Chauhan submits that, by operation of the erstwhile proviso to Section 1(2), Parts I, III and IV of the 1996 Act did not apply to domestic arbitrations. Ergo, they did not apply to the present arbitration as well. The learned Arbitrator, therefore, in his submission, erred in conducting the arbitration in accordance with Part I of the 1996 Act.
7. I am unable to accept the submission.
8. The erstwhile proviso to Section 1(2), in my considered opinion, has no application to the present case.
9. The said proviso, no doubt, excepts the applicability of the 1996 Act to the State of Jammu and Kashmir in the case of domestic arbitration. Where, according to me, Mr. Chauhan erres is in assuming that, therefore, the proviso would ipso facto apply to the present case.
10. The mere fact that there is a reference to the State of Jammu (2) It extends to the whole of India: Provided that Parts I, III and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation. and Kashmir in the erstwhile proviso to Section 1(2) does not, by itself, make the proviso applicable to the case at hand.
11. The reason is obvious. Clause 20.[6] itself goes on to state that the place of arbitration was to be the neutral location specified in the Contract Data. The Contract Data, annexed to the agreement, specified the “neutral location” as Delhi, India. As such, the place of arbitration was contractually fixed as Delhi.
12. The Supreme Court has held, in BGS SGS Soma JV v NHPC Ltd[4], thus:
Where, therefore, a place or venue of arbitration is identified in an arbitration agreement, and no separate clause fixing the seat of arbitration exists, the venue of arbitration is to be treated as the arbitral seat. Ergo, by operation of Clause 20.[6] read with the specification in the Contract Data of Delhi as the place of arbitration, Delhi became, the seat of arbitration for the purposes of the arbitral proceedings in the present case.
13. As the seat of arbitration was Delhi, there is no occasion for the Court to apply erstwhile proviso to Section 1(2) of the 1996 Act.
14. If, for example, the seat of arbitration were to be fixed as Srinagar or some other place in the State of Jammu and Kashmir, it might have been possible for the petitioner to invoke the erstwhile proviso to Section 1(2) of the 1996 Act. Where the seat of arbitration is Delhi, however, the proviso which applies to the State of Jammu and Kashmir, which excepts the application of the 1996 Act to the State of Jammu and Kashmir, does not call for any application at all.
15. The invocation, by Mr Chauhan, of the erstwhile proviso to Section 1(2) of the 1996 Act is, therefore, misconceived.
16. The second submission of Mr. Chauhan is based on the stipulation, in the Contract Data, of the “governing law” as the law applicable to the State of Jammu and Kashmir.
17. On this, the position of law is no longer res integra. The Supreme Court has, on more than one occasion, distinguished between the governing law, being the law applicable to the dispute, and the contract, and the curial law, which applies to the arbitral proceedings. This distinction was thus explained in Government of India v Vedanta Ltd[5]:
18. It is true that the need to distinguish between the substantive law that applies to the contract, and the curial law that applies to the arbitral proceedings, does not ordinarily arise in domestic arbitrations, as arbitration all over India is governed by the 1996 Act. It is only in the state of Jammu and Kashmir that there exists an independent arbitral statute, in the form of the J & K Arbitration Act. The situation is, thus, sui generis in that sense, and has arisen only because of the existence of the J & K Arbitration Act, parallelling which there is no other statute in the whole of India.
19. By virtue of the existence of the J & K Arbitration Act, however, the situation has become legally analogous to the situation that applies in international commercial arbitrations, in which the Court is faced with the issue of whether to apply, to the arbitral proceeding, the 1996 Act or the foreign arbitral law. The distinction that Vedanta draws between the curial law, which governs the arbitration and is determined on the basis of the arbitral seat, and the substantive law that applies to the contract and its enforcement and implementation, therefore, applies.
20. Applying the Vedanta principle, the only sequitur of the specification of the law of Jammu and Kashmir as being the “governing law”, is that the contract would be governed by the law that applies to the State of Jammu and Kashmir. The curial law which applies to the arbitration has, nonetheless, to be determined on the basis of the seat of arbitration. The seat of arbitration being Delhi, the stipulation of the governing law being the law applicable to the Jammu and Kashmir can make no difference to the curial law that governs the arbitral proceedings.
21. The learned arbitrator cannot, therefore, be held to have erred in conducting the arbitration in accordance with the 1996 Act. The J & K Arbitration Act has no application.
22. The objection of Mr. Chauhan on this ground is, therefore, overruled.
23. To hear Mr. Chauhan on other grounds of challenge to the impugned award on merits, list on 21 August 2024. I.A. 1260/2023 (delay of 28 days in filing)
24. For the reasons stated in the application, delay of 28 days in filing is condoned.
25. The application is disposed of. I.A. 1263/2023 (delay of 20 days in refiling)
26. For the reasons stated in the application, delay of 20 days in refiling is condoned.
27. The application is disposed of.