The Delhi High Court on Foreign Awards and Implied Exclusion of Section 34

have discussed on several occasions the scope of the proposition in paragraph
32 of Bhatia International that the
parties may “expressly or impliedly” exclude the applicability of Part I of the
Arbitration Act in cases in which it would be otherwise applicable. The Court
has previously held that Part I is not impliedly excluded merely by choosing a
foreign substantive law (Indtel Technical Services
and Citation Infowares), but
may be if it is coupled with the designation of a foreign seat of arbitration (Dozco
India v Doosan
), or if the parties expressly choose a foreign seat and
a foreign lex arbitri (Videocon).
The Court appears also to have impliedly rejected the proposition that the mere
designation of a foreign seat of arbitration excludes Part I, because the seat
in Bhatia International was Paris, and
the seat in Yograj was Kuala Lumpur. Even
if Bhatia can be explained on the
basis that the Court relied on the language of article 23(2) of the ICC Rules, Yograj clearly found that it was the
application of Rule 32 of the SIAC Rules 2007 that excluded the Indian Act,
suggesting that the designation of Singapore as the seat did not of itself lead to this result.

J. last week considered these issues in Indiabulls
Financial Services v Amaprop Ltd
. In 2005, Amaprop invested in the
shares of a subsidiary company of Indiabulls and was granted a Put Option
enabling it to compel Indiabulls to acquire those shares at a predetermined
price. The contract contained the following provisions on governing law and dispute
resolution: (a) the contract is to governed
by New York law, with an exclusion of renvoi
(Section 12.10(a)); (b) each party
accepted the non-exclusive jurisdiction
of the courts in New York (Section 12.10(b)) and (c) all disputes shall be settled by arbitration in New York in
accordance with the Rules of the American Arbitration Association, without
prejudice to the right of any party to make an application for injunctive relief
(Section 12.11).

exercised the Put Option in 2010 at the predetermined price, but an application
filed by Indiabulls with RBI to make the transfer at this price was refused. Amaprop
commenced arbitration under the contract. The Tribunal’s award directed Indiabulls
to make a fresh application to the RBI to transfer at a certain price, and left
open the possibility that the difference between the option at the
RBI-permitted price and the Option Price would form the basis of a money award
for Amaprop. Amaprop brought an action in New York to confirm the award and
obtained an anti-suit injunction in respect of Indian proceedings.

an application was filed by Indiabulls under section 34 to set aside the New
York award on the ground that it was contrary to Indian public policy in
ignoring the provisions of the Foreign Exchange Management Act, 2000 and RBI
Circulars. Amaprop took a preliminary objection on the basis that the parties
had impliedly excluded the application of Part I of the Indian Act.

is a strong case for the view that Bhatia International itself requires reconsideration, and that the
selection of a foreign seat is the clearest indication that the parties
intended to exclude Part I – but these points are concluded by authority and will remain so unless the Supreme Court overrules Bhatia International and Venture
in BALCO. Therefore the
analysis is whether, as a matter of construction, it can be said that the
parties intended that Part I of the Indian Act should not apply. At first
sight, there is little to suggest this, beyond the selection of a foreign seat
of arbitration and a foreign proper law, and Supreme Court authority in Yograj and perhaps Bhatia itself suggests that that does not suffice. There is, of
course, Dozco v Doosan, since the parties
here also chose a foreign proper law.

J. reaches the conclusion that Part I was excluded on a different basis. First,
the learned judge rejects the suggestion that giving the New York courts non-exclusive jurisdiction indicates
that the parties did not intend to exclude the jurisdiction of the Indian
court. For this purpose, the Court cites the well-known decision of the Court
of Appeal in Deutsche Bank v
Highland Crusader
. However, the context in which that case was decided was the prior decision of
the Court of Appeal in Sabah Shipyard v
Government of Pakistan
, where the court had granted an anti-suit injunction
restraining certain proceedings in Pakistan even though England was the subject
of a non-exclusive jurisdiction clause. Sabah
was subsequently criticised, notably by Mr Rapahel, and in Deutsche Bank, Toulson LJ explained that the conclusion in that case was correct
only because it could be shown, independently,
that commencing proceedings in Pakistan was vexatious and oppressive. Although
there is an observation in that case that bringing proceedings in a certain
forum may be vexatious or oppressive even if the chosen forum was given only
non-exclusive jurisdiction, the thrust of the Court’s analysis was in fact that
such a finding is unusual and requires material independent of the jurisdiction
clause. To the extent the Delhi High Court relies on this case to hold that giving
New York non-exclusive jurisdiction is not inconsistent
with excluding the jurisdiction of the Indian court, it may be correct, but
it can go no further.

Muralidhar, J. held that the contract itself indicates that the intention of the
parties was that an arbitral award would be tested only in a New York court,
because of the reference to the New York court in section 12.10 and the conduct
of the parties when proceedings were commenced in New York. Thirdly, the Court
refers to the fact that New York was the seat of arbitration, and to Rule 57(2)
of Dicey and Morris, which, of
course, is the correct analysis but may be contrary to what the Supreme Court has
held in NTPC v Singer and Bhatia International.

other points are of interest. The first is the finding that it was open to Indiabulls
to raise non-compliance with Indian law in the New York court under the rubric of public policy. It is not clear
if this is possible, because it is ordinarily accepted public policy in the New
York Convention is a reference to the public policy of the enforcing State. The
second is that this case appears to implicitly accept that parties can
impliedly exclude certain provisions
in Part I without excluding the remainder. That is because section 9 would not
have been impliedly excluded in this case, since section 12.11 of the contract allowed
the parties to approach other courts for interim relief – and yet, section 34

About the author

V. Niranjan


  • Sir, if you could please the meaning and the consequence of this sentence:-
    b) each party accepted the non-exclusive jurisdiction of the courts in New York..

  • Thanks, Niranjan. It is also curious as to how the arbitration award could be 'crafted' to overcome the pricing policy of the RBI under the FEMA Circular. This also goes to the root of enforceability of options granted in favour of foreign shareholders. However, the Delhi High Court in para 35 felt it was not necessary to consider whether this was opposed to public policy, thereby leaving the question open for now.

  • Hello Niranjan – Can't this case have been decided on the simple issue of estoppel. IndiaBulls participated in the NY proceedings without demur, and must not now be allowed to challenge the same before the Indian court on the ground of Indian public policy?

  • Thank you for your comments. By "accepted non-exclusive jurisdiction", I mean that each party agreed to submit to the jurisdiction of the chosen court, without prejudice to its right to initiate proceedings in any other court. This is not uncommon in commercial agreements – it makes a forum non conveniens argument more difficult, but also makes it harder to obtain an anti-suit in favour of the chosen court if some other court is first seized.

    I agree. In fact this was one of the main arguments made by the appellants in the Supreme Court in Balco – that in cases where a Tribunal's award is in conflict with public policy, it is either an Indian court or no court that will set aside the award. One response to that argument is that if the parties choose a foreign seat, they are aware that this will be the result and may in some cases even intend to prevent challenges based on the substantive law of the contract.

    Yes, the fact that Indiabulls participated was significant. But the question before the Delhi High Court was whether at all Part I of the Indian Act applied – since it concluded that it did not, it did not have to consider the question of estoppel.

  • Sir,

    I have a doubt, you state that the Seat of Arbitration seemingly is not sufficient to impliedy exclude indian jurisdiction as per the Yograj case, however, a recent calcutta high court case (Coal India Ltd v Canadian Commercial Corporation )has held the choice of seat to be sufficient as a way of impliedly avoiding Indian Jurisdiction. I am curious if one was to approach say the Bombay High Court, on such a matter, where only the seat is specified,

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