Holding

The Supreme Court found the questions of the two‑tier arbitration clause’s validity and the nature of the ICC award under the Arbitration and Conciliation Act, 1996 to be unsettled and therefore referred the matter to a larger bench for definitive resolution.

Summary

Centrotrade Minerals & Metal Inc. and Hindustan Copper Ltd. entered into a contract containing a clause that provided for arbitration in India and, if either party was dissatisfied, a second arbitration in London whose award would be binding. The Indian arbitrator issued a NIL award, after which Centrotrade invoked the London arbitration, which awarded substantial sums to Centrotrade. Hindustan Copper challenged the award on grounds of procedural fairness, public policy, and the validity of the two‑tier arbitration clause, while Centrotrade sought enforcement. The Calcutta High Court upheld enforcement, but the Division Bench set aside that decision. The Supreme Court was divided: Justice S.B. Sinha held that the two‑tier arrangement violated the Arbitration and Conciliation Act, 1996 and that the award could not be enforced; Justice Tarun Chatterjee held that the arrangement was permissible, that the London award was a foreign award, and that Hindustan Copper was denied a fair hearing, thus ordering the award set aside and remitted for fresh arbitration. Owing to the split, the Court referred the matter to a larger bench.

Issues considered

The validity of a two‑tier arbitration agreement under the Arbitration and Conciliation Act, 1996.
Whether the ICC arbitrator acted as an appellate arbitrator over the Indian award.
Whether the ICC award qualifies as a foreign award under Section 44 of the 1996 Act.
Whether Hindustan Copper was given a proper opportunity to present its case under Section 48(b) of the 1996 Act.

Legislation cited

Arbitration and Conciliation Act, 1996s. 16, s. 2, s. 23, s. 34, s. 35, s. 36, s. 44, s. 48, s. 51, s. 7, s. 85
Foreign Awards (Recognition and Enforcement) Act, 1961s. 9(b)
Indian Contract Act, 1872s. 23

Subjects

ArbitrationTwo‑tier arbitrationForeign awardSection 34Section 44Section 48Public policyEnforcement of arbitral awardIndian Contract Act

Judgment

A MIS. CENTROTRADE MINERALS & METAL INC.
v.
HIND USTAN COPPER LTD.

MAY 9, 2006

B [S.B. SINHA AND TARUN CHATTERJEE, JJ.]

Arbitration and Conciliation Act, 1996--Sections 34. 35. 36, 48(1)(bF·
Arbitration agreement providing that at first instance disputes to be settled
by arbitration in Indian and if either party was in disagreement with the
arbitration result therein they had right to appeal to a second arbitration
c in London, U.K. results of which were to be binding on both parties--
Arbitrator in the Indian arbitration making a NIL award-.()n appeal to
Arbitrator in London, award passed directing one of the parties to pay the
other the amounts quantified therein--High Court rejecting execution of
award-- Validity ofarbitration agreement-·On appeal. difference ofopinion--·
D Matter referred lo larger bench-Section 23 of Contract Ad, 1872

Appellant entered into contract with respondent for supply of goods.
The contract had an arbitration agreement which provided that all
disputes between the parties relating to the contract were to be settled
by arbitration in India through the arbitration panel of the Indian
E Council of Arbitration in accordance with the Rules of Arbitration of the
Indian Council of Arbitration, and if either party was in disagreement
with the arbitration result in India, they had the right to appeal to a
second arbitration in London, U.K. in accordance with the rules of
conciliation and arbitration of the International Chamber of Commerce,
F and the results of this second arbitration were to be binding on both the
parties.

Disputes arose between the parties. Appellant invoked the arbitration
clause. The Arbitrator appointed by the Indian Council of Arbitration
made a NIL award. Appellant thereupon invoked the second part of the
G said arbitration agreement whereupon Arbitrator held his sittings in
London. Respondent in a series of letters to the International Court of
Arbitration and to the Arbitrator, maintained that the arbitration
agreement was void being opposed to public policy. However, they received
copies of all correspondence passed between appellant and the arbitrator
and of all submissions made. When no defence submission or supporting
H
146
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. 14 7

evidence was produced by respondent within the time prescribed, A
Arbitrator gave them one last opportunity to inform him any intention
on their part to put in a defence and to seek an extension of time for doing
so. A further fax was sent to them whereby the Arbitrator informed the
parties that he was proceeding with the award. On 1lth August, 2001,
the Arbitrator received a fax from firm representing the respondent
requesting for extension of time for one month to put in a defence, B
pursuant whereto on 16th August, 2001 it was directed that submissions
in support of an application for extension of time for a defence and on
the substantive merits of the dispute together with any evidence relied
in relation thereto should be received by him by 31st August, 2001 in
absence whereof he would not give any consideration thereto. On 27th C
August, 2001, the firm again sought for a further three weeks' extension
of time for making their submissions and serving supporting evidence,
pursuant whereto time for filing those submissions of evidence was
extended till 12th September, 2001. However, the submissions were
received by the Arbitrator on 13th September, 2001. In l,Jis award,
arbitrator directed the respondent to pay appellant sums quantified by D
him.

Respondent filed an application under Section 48(1)(b) of the
Arbitration and Conciliation Act, 1996 stating that the arbitrator did not
give them sufficient opportunity to present their case. They also filed a E
suit before Civil Judge praying for a declaration that the award was void
and a nullity, as also for permanent injunction and damages. Appellant,
on the other hand filed an application for enforcement of the award in
the Court of the District Judge, which was considered as Execution Case.
However, on application of appellant, these proceedings were transferred
to the High Court. A Single Judge of the High Court allowed the execution F
of the award. Aggrieved therewith, respondent preferred an appeal which
was allowed by a Division Bench, Appellant and respondent are both
questioning the correctness of the said judgment in the present appeal.

Appellant contended that (i) the second arbitration proceedings G
having taken place in London, the award was a foreign award within
the meaning of Section 44 of the Act (ii) that the respondent was able
to present his case in the arbitration proceedings within the meaning
. of Section 48(1)(b) of the Act, and even otherwise refusal of an
adjournment by an Arbitrator was not a ground for challenging an
arbitral award. H
148 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.

A Respondent contended that (i) the arbitration agreement was void
and of no effect being opposed to public policy and having regard to the
fact that the first award was made in terms of the Indian law, reference
to the second arbitrator was impermissible inasmuch as the 1996 Act
envisages only one award (ii) the Arbitrator prepared the award without
the pleadings of the parties before him and considering only the first part
B of the written statement without waiting for the second part; neither any
issue was raised, nor any date was fixed for hearing and, as the parties
were not given an opportunity to examine the witnesses, the award was
liable to be set aside in terms of Section 48(1 )(b) of the Act.

c Referring the matter to larger Bench the Court ...

HELD : Per S.B. Sinha, J. ·

I. The High Courts judgment cannot be sustained. Though the
reasons assigned by it, are not agreed with, the conclusion thereof are
D upheld on different grounds. (195-G-Hf

2. The 1996 Act contains a coherent and model framework. It
envisages only one award under one set of rules. It does not contemplate
multi-layer awards governed by different sets of rules. Section 34 of the
E Act provides for the mode and manner in which an arbitral award can
be questioned. Such a course can be taken only by filing an application
which shall be in accordance with sub-section (2) and sub-section (3). An
award in the Indian part of the award, thus, could be set aside only by
filing an application. The law, therefore, does not contemplate that despite
F the rigour of Section 34 of the Act, an award which although not challenged
and becomes enforceable and executable still can be subject matter of a
foreign award. An award as soon as it becomes enforceable, it becomes
final and binding in terms of Section 35 of the Act. (174-D, 176-G-H)

2.2. By reason of Section 36 of the 1996 Act, a legal fiction has been
G created to the effect that on expiry of the period prescribed for setting
aside an award as envisaged under Section 34 of the Act, the award
becomes capable of being executed and enforced. The concept of provision
for an appeal before another forum from an award and that too when
a part of the award would be a domestic award and another part would
H be a foreign award is not contemplated under the 1996 Act. (177-B-Cj
CENTROTRADE MINERALS AND METAL INC. '" HINDUSTAN COPPER LID. J49

- 2.3. Throughout the provisions nowhere it is mentioned that an
appeal can be made or an application can be filed against the award to
a separate arbitration board or forum. So, the finality and legality has
A

to be determined by the Court if it is so challenged. Otherwise, reference
to a second arbitration panel would consume more time as arbitrators
would decide the matter after listening the dispute afresh. Presuming
that the reference to the arbitrator is made for second time and B
subsequently arbitrator gives an award, it would be more time consuming
and complex if validity of the first award is challenged along with
second award. So, following the scheme of the 1996 Act, it is more
viable and convenient to accept the first award without opting for

.. second time arbitration and then to decide it, if the award is challenged.
[178-F-H)
C

Hanskumar Kishan Chand v. Union of India, AIR (1958) SC 947;
Hirata/ Agarwal/a & Co. v. Jakin Nahopier & Co. Ltd, AIR (1927) Cal 647;
Fazalally Jivaji Raja v. Khimji Poonji and Co., AIR 1934 Born 476 and
MA. Sons v. Madras Oil & Seeds Exchange Ltd & Anr., AIR (1965) Mad. D
392, held inapplicable.

'The Law of Arbitration' 7th Edition by S.D. Singh at page 359,
referred to.

2.4. Even the principles analogous to Order XLI, Rule l of the Code
E
of Civil Procedure envisages that filing of an appeal shall automatically
not mean stay of the operation of the decree. In that view of the matter,
mere filing of an appeal would not make the award unenforceable. No
prayer for stay of the operation of the award had been prayed for nor
the appellate arbitrator had directed stay of the operation of the award. F
The 1996 Act does not contemplate that the arbitrator would be entitled
to sit in appeal over an executable decree. Even the doctrine of merger
shall not apply inasmuch as the said doctrine contemplates an appellate
authority who can pass the same type of order which could be passed by
the original authority. If by fiction of law an award becomes a decree
without the intervention of the court, the nature of an award which can
G
be passed by the appellate arbitrator, would lose the character of an
award. The doctrine of merger, therefore, would not apply. A decree,
whether by reason of a statute or a legal fiction created under the statute,
would have different and distinct connotation vis-a-vis an award. By
agreement of the parties, a private adjudicator cannot sit in appeal over H
150 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A an enforceable decree. A decree passed by a court of law may be set aside
by that court itself in exercise of its review jurisdiction or by an appellate -
court created in terms of a statute. A private adjudicator, it will bear
repetition to state, cannot overturn a decree created by a legal fiction.
A legal fiction, it is well settled, must be given its full effect. 1179-B-FI

B Bhavnagar University v. Palitana Sugar Mill (P) Ltd., (20031 2 SCC
111; Ashok Leyland ltd. v. State of TN., (20041 3 SCC 1 and Bharat
Petroleum Corporation ltd. v. P. Kesavan and Another, (20041 9 SCC 772,
relied on.

C 2.5. A domestic award, in view of the statutory scheme, is subject
to the supervision of a court of law. Its jurisdiction encompasses within
its purview over the entire process of arbitration. An award is finally
subject to a part agreeing to take recourse to the provisions of Section
34 of the 1996 Act and it becomes a decree. An award can be set aside
only if the court comes to the conclusion that one or the other grounds
D
contained in Section 34 of the Act exist. A challenge to the domestic
award can, thus, be made only before a national court designated by
the Act itself and on the grounds specified in Section 34 of the Act. A
fortiori, the validity ofa domestic award cannot be questioned before any
other forum including the forum chosen by the parties, if any.
E [179-G-H, 180-AJ

Liverpool & London SP. & I Asson. Ltd. v. M. V. Sea Success I, (20041
9 SCC 512; Pratap Singh v. State ofJharkhand, [20051 3 SCC 551 and
Zee Telefilms Ltd. v. Union of India, [2005] 4 SCC 649 referred to.
F
2.6. If the first award was to be enforced (although no occasion
arose therefor), it could have been done only in terms of Part I of the Act.
Despite invocation of second part of the arbitration agreement, it would
not cease to be a decree in terms of Section 36 of the Act unless the
operation thereof was directed to be stayed. In other words, the first
G award of the arbitral tribunal, on the expiry of the period specified for
challenging the award, became a decree despite invocation of the second
part thereof. It is difficult to comprehend that despite a part of the award
becoming a decree of the court, the same would not be bin<ling upon the
arbitral tribunal. Section 34 of the 1996 Act provides for setting aside
H a domestic Indian award. It unlike the English Arbitration Act does not
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. 151

permit the parties to limit or avoid the operation of the statutory A
• provisions. [195-D-E)

3.1. 1996 Act puts domestic awards and foreign awards in two
different and distinct compartments, subject of course to certain
overlapping provisions. It may not, therefore, be possible to hold that the
1996 Act contemplates that an arbitration award can be an admixture B
of domestic award and foreign award. [180-H, 181-A)

3.2. A multi-tier arbitration may be held to be operative and valid
when it was goverened solely by the 1940 Act or the 1961 Act inasmuch
as in such an event, the procedure laid down therein could have been C
followed. The 1996 Act, however, on the other hand, repeals and replaces
not only the 1940 Act but also the 1961 Act and provides for different
forums and different procedure for resolution of a dispute through an
arbitrator. It is inconceivable that one part of the arbitration agreement
shall be enforceable as a domestic award but the other part would be
enforceable as a foreign award. An award made in terms of one arbitration D
agreement can either be a domestic award or a foreign award; wherefor
different procedures have been laid down, even when the consequences
from such award are different and when the grounds thereof are also
different and distinct. The fundamental legislative policy brought out by
the 1996 Act, thus, being not in consonance with having two tier arbitration E
which had two different statutes governed by two different provisions
and would be subject to different procedures is not valid. (181-C-E)

3.3. The Indian law would be applicable in reason to the first part
of the arbitration, namely, the India Council of Arbitration, whereas ·
second part thereof would be governed by International Chamber of F
Commerce, Paris Rules. Both parts of the arbitration proceeding,
therefore, have not been carried out under the same institution. An
arbitration agreement envisioning different procedures at different stages
cannot be countenanced under the 1996 Act. Had the appeal been provided
within the set-up of Indian Council of Arbitration, subject to the
compliance of time frame, probably the agreement would have been
G
valid. But, it is not so. [181-F-G]

Bhatia International v. Bulk Trading SA., [2002] 4 SCC 105 and
Furest Day Lawson Ltd. v. Jindal Exports Ltd., [200IJ 6 SCC 356, referred
to. H
152 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.

A 4.1. A person may waive his right. Such waiver of right is permissible
even in relation to a benefit conferred under the law. But it is trite that
no right can be waived where public policy or public interest is involved.
Jurisdiction on a tribunal/ court is a creature of statute. Jurisdiction on
Arbitration can be conferred by agreement between the parties. But, the
contract between the parties must be in obedience to law and not in
B derogation thereof. [182-A-Bf

4.2. Contracting out is permissible provided it does not deal with a
matter of public policy. An agreement under no circumstances can violate
the Public Policy. [182-B[

C 4.3. In terms of the laws of India governing the field, the parties
cannot contract out of the statute and take recourse to such a procedure
which would for all intent and purport make the provisions of Section
34 and 36 of the 1996 Act nugatory by entering into contractual
arrangement or otherwise. The 1996 Act does not postulate that the
parties can contract out of the provisions thereof. The arbitration
D agreement of the parties, therefore, must be made strictly in terms of the
provisions of the 1996 Act. [183-C]

4.4. Indian statute, i.e., the 1996 Act does not provide such
"contracting out" provision so that parties can fix/determine, by their
terms of agreement, the procedure of appeal after the award is made.
E [184-AJ

4.5. Such a contractual arrangement, having regard to the provisions
contained in Section 23 of the Indian Contract Act shall be void being
opposed to public policy. The parties, it is trite, cannot by contract or
otherwise confer jurisdiction on a forum which is prohibited by law in
F
force in India. The law in force in India does not permit to limit or avoid
the operation of the statutory provisions. [ 184-BJ

5. Even if it is held that two tier arbitration is permissible, under
the 1996 Act it might lead to an incongruity. A two tier arbitration is
invalid in law in the context of the 1996 Act having regard to Section 23
G
of the Contract Act as statutory jurisdiction cannot be waived by contract.
It is, thus, amply clear that the very scheme of the 1996 Act does not
contemplate a two tier arbitration agreement of this nature. [194-Ff

6. Condition~ as regard non-existence or invalidity of an arbitration
H agreement can be raised while resisting enforcement of a foreign award.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. 15 3

Section 4 of the 1996 Act contemplates existence of an arbitration A
agreement which would mean a valid arbitration agreement. If the
arbitration agreement is void and of no effect, it is non est in the eye of
law and, thus, cannot be enforced. An arbitrator derives its jurisdiction
from a reference which would mean a dispute and difference to be
adjudicated upon in pursuance of or in furtherance of a valid arbitration
agreement. It is not in dispute that the parties agreed that the Indian law B
shall apply. The validity or legality of a contract, thus, must be judged
on the touchstone of Section 23 of the Indian Contract Act. If a contract
is opposed to a public policy, the same is void and of no effect.
1194-G-H, 195-A]

National Thermal Power Corporation v. The Singer Company and, AIR
c
(1993) SC 998, referred to .

7.1. The expression 'public policy' in India has been used for three
different situations, namely, (i) an arbitral award may be set aside under
Section 34(2)(b) of the 1996 Act if it is in conflict with the public poilcy
D
of India; (ii) enforcement of a foreign award (New York Convention
Award) may be refused under Section 48(2)(b) if the enforcement of the
award would be contrary to the public policy oflndia; and (iii) a foreign
award (Geneva Convention Award) may be enforceable under Section
57(J)(b) if the enforcement of the award is not contrary to the public
policy or law of the India. [184-C-D) E
Sumitomo Heavy Industries Ltd. v. ONGC Ltd, [1998] 1 SCC 305,
referred to.

7.2. The expression 'public policy' will have the same connotation
in respect of an arbitration agreement or an award. The doctrine of F
public policy must be held to be a ground for setting aside an arbitration
agreement and consequently an award. [184-E, 189-G]

7.3. Such patent illegality, however, must go to the root of the
matter. The public policy, indisputably, should be unfair and unreasonable
so as to shock the conscience of the court. Where the arbitrator, however, G
has gone contrary to or beyond the expressed law of the contract or
granted relief in the matter not in dispute would come within the purview
of Section 34 of the Act. 1189-H; 190-A)

7.4. What would be a public policy would be a matter which would
again depend upon the nature of transaction and the nature of statute. H
154 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A For the said purpose, the pleadings of the parties and the materials brought
on record would be relevant so as to enable the court to judge the concept
of what was a public good or public interest or what would otherwise be
injurious to the public good at the relevant point as contradistinguished
by the policy of a particular Government. [190-B-C)

8 Renusagar Power Co. Ltd. v. General Electric Co .. [ 19941 Supp I SCC
644; Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd.. [2003[ 5 SCC
705; Central Inland Water Transport Corporation Ltd. v. Brojo Nath Gunguly,
[1986) 3 SCC 156; Godawat Pan Masala Products l.P Ltd v. Union of
India, (2004[ 7 SCC 68; Gherulal Parakh v. Mahadeodas Maiya, [1959)
C Supp 2 SCR 406; Zoroastrian Coop. Housing Society Ltd v. District Registrar,
Coop. Societies (Urban}, [2005) 5 SCC 632; State of Rajasthan and Uthers
v. Basant Nahata, (2005) 12 SCC 77; Dharma Prathishthanam v. Mudhok
Construction Pvt. Ltd., (2005) 9 SCC 686 = (2004) 3 Arb. LR 432 {SC);
Bennett Coleman and Co. (P) Ltd v. Punya Priya Das Gupta, [ 1969) 2 SCC
1 and Brace Transport Corporation ofMonrovia, Bermuda v. Orient Middle
D East Lines ltd, Saudia Arabia and Others, AIR (1994) SC 1715, referred
to.

Harbour Assurance Co. (UK) ltd v. Kansa General lnternutional Co.
Ltd., (1993) 3 All ER 897 and Montrose Canned Foods Ltd. v. Eric Wells
E (Merchants) Ltd., (1965) Lloyd's Rep 597, referred to.

The Law and Practice ofArbitration and Conciliation by OP. Malhotra,
Second edition, page 1174, referred to.

Russell on Arbitration, 22nd edition, 2003, page 389, para 8-046 and
F Chitty on Contract, 29th edition, 2004, page 961, para 16-045. referred
to.

8.1. A jurisdictional issue can be raised in two ways. A party to an
arbitration proceedings may take part in arbitral proceedings and raise
the question of jurisdiction before the arbitral tribunal. He may also
•
G challenge the jurisdiction of the arbitrator without participating in the
arbitral proceedings. 1182-DI

8.2. Under the English Arbitration Act, an appeal on jurisdiction
would involve rehearing of the matter by the court at which the party
H can adduce evidence and reargue the entire issue of evidence. There is
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. 155

absolutely no reason as to why the said principle shall not apply to India. A
If a jurisdictional issue can be raised before the court even for the first
time, the court would be entitled to take on records even the fresh
hearing, it goes without saying that it would also be entitled to determine
the jurisdictional fact. (182-E-FJ

Salvant N. Viswamitra v. Yadav Sadashiv Mule (Dead) Through LRS., B
[2004) 8 sec 706, referred to.

Smith v. East Elloe Rural District Council, [1956) l All ER 85S'and
Primetrade AG v. Ythan Ltd., (2006] 1 All ER 367, referred fo.

8.3. Respondent from the beginning contended that the provision c
contained in the second part of the arbitration is void ab i11itio and of no
effect. They even filed a suit prior to entering into the reference by the
Arbitrator. Even after the award was passed, proceedings before
appropriate courts had been initiated. In its written statement filed
before the arbitral tribunal, the question as regards the jurisdiction of
the arbitrator was questioned by it. The arbitrator had held that such D
an arbitrator agreement is valid in law. In terms of Section 16 of the 1996
Act, the arbitrator, keeping in view the fact that the question as regard
his jurisdiction had been raised was bound to decide the same before
entering into the merit of the matter. Only in the event, it came to the
conclusion that the arbitral tribunal had the requisite jurisdiction, it E
could have proceeded to determine the merit of the matter. In view of
the fact that in the event an arbitrator was of the opinion that he had
no jurisdiction in the matter, the arbitration clause being invalid in law,
appellant could have preferred an appeal in terms of sub-secti6i (2) of
Section 37 of the 1996 Act. The question as regard lack of inherent
jurisdiction on the part of the arbitrator in view of the second part of F
the arbitration clause being opposed to the public policy could have been
raised by respondent in terms of Section 34 of the 1996 Act. [194-A-E)

Per Tarun Chatterjee, J:

1.1. There have been delays in the arbitral proceedings right G
from the beginning when Appellant approached the ICC on 22nd Feb.
2000. Most of the delays were due to refusal of respondent to participate
in the proceedings. However, there were some delays which cannot be
related to their conduct. The whole arbitral proceeding was conducted
in a manner indicative of lack of urgency. Further, there is merit in H
156 SUPREME COURT REPORTS [2006] SUPP. '1. S.C.R.

A submission of respondent that due to the total dislocation of air traffic
caused by the terrorist attack of 11th September 2001, the materials sent
by them to the ICC arbitrator reached late. Under these circumstances
a delay of few days in serving their submissions with supporting evidence,
after having accepted to participate in the arbitral proceedings, seems
excusable and should have been excused. Considering the overall picture
B of the circumstance and the delays, refusal of the arbitrator to consider
material received by him after 13th September and before 29th September,
2001, seems to be based on frivolous technicality. The arbitrator ought
to have considered all the materials received by him before he made the
award on 29th September 2001. It is true that where a party is refused
C and adjournment and where it is not prevented from presenting its case,
it cannot normally claim violation of natural justice and denial of a fair
hearing. However, in the light of the delays, some of which were not
attributable to conduct of respondent, it was only fair to excuse their
lapse in filing the relevant material on time. Therefore, it can be said that
respondent did not get a fair hearing and could not effectively present
D its case. 1213-H, 214-A-B]

Hariom Maheshwari v. Vinit Kumar Parikh, (20051 l SCC 379,
distinguished.

Minimetal Germany GmBH v. Fl!rco Steel Ltd., I 199911 All ER Comm.
E 315, referred to.

1.2. In view of the above, enforcement of the ICC award should be
refused in view of Section 48 of the Act. Accordingly, the judgment of
the Division Bench and also the judgment of the Single Judge of the
'\--
Calcutta High Court must be set aside and matter remitted back to the
F ICC arbitrator for fresh disposal of the arbitral proceedings in accordance
with law after giving fair and reasonable opportunity to both the parties
to present their case. [214-C-D]

2.1. There is nothing under the 1996 Act prohibiting the parties
from entering into and agreement whereunder the first arbitration
G proceeding is conducted under Part I of the 1996 Act and the appeal
therefrom is conducted under Part II of the 1996 Act. In fact, earlier, two
separate legislations i.e. the 1940 and 1961 Acts dealt with domestic
awards and foreign awards respectively. However, the legislature keeping
in mind the necessity to have similarity in administration of domestic
H awards as well as foreign awards, has consolidated the laws relating to
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. J57

domestic and foreign awards in the 1996 Act, in effect making both the A
types of awards enforceable under the same Act. Keeping this in mind,
and also that parties' autonomy is paramount, it is not impermissible
under the 1996 Act to have one part of the award governed by Part I
and the other part by Part II. Further, an appeal is an intrinsic part of
the original proceeding and it is the final award that comes out after an
appeal is preferred from the first awards, that is relevant for the purpose B
of 1996 Act. Thus it follows that nothing in the 1996 Act prohibits the
parties from providing a two tier arbitration wherein one tier is dealt
with under Part I and the other under Part II of the 1996 Act. Such an
agreement does not violate the provisions of Section 34 and 36 of the 1996
Act and it cannot be said to be invalid as being orumsed to public policy
Of India. Therefore, the second part of clause 14 of the agreement and
c
the ICC arbitration in its furtherance are not invalid as being opposed
to public policy of India. (204-D-H, 205-A]

Hanskumar Kishan Chand v. Union of India, AIR (1958) SC 947,
relied on.
I'
Hirata! Agarwalla & Co. v. Jakin Nahopier & Co. Ltd, AIR (1927)
Cal. 647; Fazalally Jivaji Raja v. Khimji Poonji and Co., AIR (1934) Born.
476 and MA. Sons v. Madras Oil & Seeds Exchange Ltd & Anr., AIR (1965)
l\fad. 392, approved.

2.2. The relevant section of 1996 Act is Section 35 which only E
provides that 'subject to this part of the arbitral award shall be final and
binding on the parties and persons claiming under them respectively.'
Similarly, condition no. 7 of the First Schedule of the 1940 Act provided
that 'the award shall be final and binding on the parties and persons
claiming under them respectively'. Section 35 is not a bar to appellate
arbitration. This section only comes into operation once the arbitration F
proceedings as a whole which must include appellate arbitrations, if any
have ended. Allowing the appellate arbitrations is fully in consonance
with the objects of the 1996 Act. (203-D-E, 204-B-CJ

2.3. It is well recognized that autonomy is a paramount consideration
of the 1996 Act subject only to such safeguards as are necessary in the G
public interest. Therefore, so long as an agreement between the parties
to enter into an appellate arbitration does not derogate from the public
interest, it is always permitted. The object of Section 35 of the Act is to
limit the ambit of court intervention in arbitral awards and this object
is not affected by allowing appellate arbitrations. [205-B-C) H
158 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Russel on Arbitration 22nd Edition page 393, referred to.

2.4. Respondent submitted that use of the word 'only' in section 34
of the Act would show the legislative intendment that the domestic award
cannot be challenged in any manner except in the manner provided by
Section 34 of the Act. This is not the position in the present case in view
B of the Second part of clause 14 of the agreement. In this case, the parties
consciously agreed to have the domestic award followed by the foreign
award. In any view of the matter, the provisions of Section 34 of the Act
are not intended to curtail the powers of the contracting parties to
contract in the manner they desire. [202-D-EJ

c 3.1. Two tier arbitrations wherein the original arbitration proceeding
is domestic and thus governed by Part I of 1996 Act, and the appellate
proceeding is foreign and thus governed by Part II of the Act can be
permitted. The doctrine of merger equally applies in cases of appellate
arbitrations, such that on the issuance of appellate award, the original
award merges with it and only the appellate award is valid and capable
D of enforcement. This was also the intention of the parties while
incorporating Part II of Clause 14 of the agreement, which clearly says
that only the award that would be passed by the ICC arbitrator would
be binding on the parties and the judgment upon that award may be
entered in any court of jurisdiction. (205-D-FJ
E 3.2. It is now well settled that original and appellate proceedings are
not distinct legal proceeding, but only constitute stages of the same legal
proceedings, which are connected by an intrinsic unity. (207-A-BI

4.1. lt appears that the first part of the arbitration agreement deals
....
with arbitration in accordarce with the Rules of Arbitration of the
F
Indian Council of Arbitration. This part of Clause 14 of the arbitration
agreement does not say that the results of the arbitration agreement will
be binding on both the parties. Nor it says that the judgment upon the
award of the first arbitration may be entered in any court of jurisdiction. .'
On the other hand, the second part of clause 14 of the agreement clearly
G states that if a part is in disagreement with the arbitration result in India
then the aggrieved party would have a right to appeal to a second
arbitration in London. The word 'appeal' in this part of Clause 14 of the
agreement has significance. If the phrase 'in disagreement with the
arbitration agreement in India' and the word 'appeal' are read together,
inevitable conclusion is that ICC arbitrator would act as an appellate
H
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. 159

arbitrator based in London. Moreover, if the second arbitration is not A
treated as an appeal, then it would be pointless for a party dissatisfied
with a 'Nil' award in India to refer the matter for a second arbitration
in London, as the 'Nil' award would always prevail over the ICC awards.
Accordingly, this would defeat the object of the provisions in the second
part of the clause 14 which clearly states that 'the result of this second
arbitration will be binding on both the parties'. [206-E-H, 207-A] B
4.2. While passing the Award, the ICC arbitrator in his award had
observed that the award passed by the Indian Arbitrator was wrong. The
ICC arbitrator dealt with the correctness of the first award and was not
acting as a mere second arbitrator but rather as an appellate forum.
(207-B, H] c
5.1. Under the repealed Foreign Awards (Recognition and
Enforcement) Act, 1961Section9(b) expressly provided that its provisions
would not be applicable to any award made on an agreement governed
by the law of India. However, on repeal of this 1961 Act, by Section 85
of the Act, no corresponding provision to Section 9(b) of the 1961 Act D
has been made. In other words, the position of law under Section 9(b)
of the Foreign Awards (Recognition and Enforcement) Act, 1961 was
deliberately not incorporated in the present Act. Therefore, under the
present Act, an award in pursuance ofan arbitration agreement governed
by Indian Law. if the conditions under Section 44 are satisfied, will not E
cease to a foreign award, merely because the arbitration agreement is
governed by law of India. (209-G-H, 210-A]

Sumitomo Heavy Industries Ltd. v. ONGC Ltd., [1998] 1 SCC 305 and
National Thermal Power Corporation v. The Singer Company, AIR (1993)
SC 998, held inapplicable. F
5.2. It cannot be disputed that the conditions specified in Section 44
of the Act were satisfied, that is to say there exists a commercial relationship
between the parties, the ICC award was made in pursuance of an
agreement in writing between the parties and the award was made in a
Convention Country, UK. Section 44 of the Act makes award foreign if G
the above mentioned criteria are fulfilled, 'unless the context requires
otherwise'. (209-C-D]

. 5.3. Production of proof that such an award has been set aside or
'· suspended by a competent authority of the country in which or under the
law of which, that award was made, cannot change a foreign award to H
160 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A be a domestic award, but merely makes it a foreign award which may
not be enforced. [210-E-F)

5.4. Sub-Section (2) of Section 2 of the Act clearly says that Part of
the Act shall apply where the place of arbitration is in India. Sub-section
(7) of Section. 2 of the Act says that an arbitral award made under Part
B I shall be considered as a domestic award. In view of sub-section (2) and
(7) of Section 2 of the Act read with Section 44, there cannot be any doubt
that the Division Bench was wrong in its conclusion that the award
passed by the ICC arbitrator was a domestic award. It should be kept
in mind that Section 9(b) of the Foreign Award (Recognition and
Enforcement) Act, 1961 which provided that it did not apply to an
c arbitral award made pursuant to an arbitration agreement governed by
law of India, has been clearly omitted by Section 51 of the 1996 Act.
(211-E-G)

5.5. The phrase 'or under the law of which that award was made'
D used in Section 48(1)(e) refers to the law of the country in which the
arbitration had its seat rather than the country whose law governs the
substantive contract. It is true that the contract and the agreement clause
in governed by the substantial law of India. It is an admitted position that
the seat of the second arbitration was in UK. Therefore, the relevant
country was UK under the procedural law of which the award was made.
E Thus, Section 48(1)(e) does not by itself contemplate attracting first part
of Section 44 of the Act. (210-G-H, 211-AI

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2562 of
2006.

p From the Judgment/Order dated 28.7.2004 of the High Court at
Calcutta in A.P.O.T. No. 182 of 2004.

WITH

Civil Appeal No. 2564 of 2005.

G S. Sarkar, Krishendu Datta, K.V. Mohan, Kalyan Vadlamani and S.S.
Jauhar for the Appellant.

Debabrata Ray Choudhary, Ms. Nandini Mukherjee and Deba Prasad
Mukherjee for the Respondent.

H The Judgment of the Court was delivered by
CENTROTRADE MINERALS AND METAL INC."- HINDUSTAN COPPER LTD. [SINHA, J.) i 61

S.B. SINHA, J : Leave granted. A
Interpretation of an agreement containing a two tier arbitration vis-a-
vis the applicability of Part I or Part II of the Arbitration and Conciliation
Act, 1996 (for short, "the 1996 Act") is in question in these appeals which
arise out of a judgment and order dated 28.07 .2004 passed by a Division
Bench of the Calcutta High Court in A.P.O.T. No. 182 of 2004. B
FACTS:

Mis. Centrotrade Minerals and Metal Inc. (for short, "Centrotrade"),
Appellant in SLP (C) No. 18611 of 2004 and the Hindustan Copper Limited

- (for short "HCL''), Appellant in SLP (C) No. 21340 of 2004 entered into a
contract for sale of 15,500 DMT of Copper Concentrate to be delivered at
Kandla Port in the State of Gujarat in two separate consignments.
C

The said goods were ultimately required to be used at the Khetri Plant
ofHCL situated in the State ofRajasthan. The seller in terms of the contract
was required to submit a quality certificate from an internationally reputed D
assayer, mutually acceptable to the parties. After the consignments were
delivered, the payments therefor had been made. However, a dispute arose
between the parties as regard the dry weight of concentrate copper.

Clause 14 of the contract contained an arbitration agreement which E
reads as under:

"All disputes or differences whatsoever arising between the parties
out of, or relating to, the construction, meaning and operation or
effect of the contract or the breach thereof shall be settled by
arbitration in India through the arbitration panel of the Indian F
Council of Arbitration in accordance with the Rules of Arbitration
of the Indian Council of Arbitration. If either party is in disagreement
with the arbitration result in India, either party will have the right
to appeal to a second arbitration in London, UK in accordance with
the rules of conciliation and arbitration of the International Chamber
of Commerce in effect on the date hereof and the results of this
G
second arbitration will be binding on both the parties. Judgment
upon the award may be entered in any court in jurisdiction,"

Centrotrade invoked the arbitration clause. The Arbitrator appointed
by the Indian Council of Arbitration made a NIL award. Centrotrade H
162 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A thereupon invoked the second part of the said arbitration agreement on or
about 22nd February, 2000. An award was made pursuant thereto.

SUIT BY HCL:

HCL, during pendency of the proceedings before the arbitrator, filed
B a suit in the court at Khetri in the State of Rajasthan questioning initiation
of the second arbitration proceeding before International Chamber of
Commerce inter alia contending that the provision for second arbitration was
void and a nullity. No interim order was passed therein despite having been
prayed for, whereupon an appeal was preferred by HCL before the District
c Judge, which was also dismissed. In a revision filed by HCL, the High Court
granted an injunction. In the meanwhile the sole arbitrator had commenced
arbitration proceedings. Centrotrade filed a special leave application before
this Court questioning the said order of injunction passed by the Rajasthan
High Court and by an order dated 8th February, 2001, the said order of
interim injunction was vacated.
D
ARBITRATION PROCEEDING:

Mr. Jeremy Cooke, Arbitrator held his sittings in London. HCL, in a
ser:es of letters to the International Court of Arbitration and to the Arbitrator,
E maintained that the arbitration agreement was void being opposed to public
policy. Despite the same, they, through their attorney, consulted about the
procedural aspects of the arbitration and had asked for their submissions in
relation to the procedure, progress and substance of the dispute. HCL also
received copies of all correspondence passed between Centrotrade and the
Arbitrator and of all submissions made. They had been given every
F
opportunity to take any point which they wished to take in their defence.
Centrotrade served their submissions and supporting evidence by the orders
made by the Arbitrator on 20th December, 2000, 19th January, 200 I and 3rd
May, 200 I. When no defence submission or supporting evidence was
produced by HCL within the time prescribed, a fax was sent to them by the
G learned Arbitrator on 30th July, 200 I giving it one last opportunity to inform
him by return of any intention on their part to put in a defence and to seek
an extension of time for doing so. A further fax was sent on 9th August,
200 I whereby the Arbitrator informed the parties that he was proceeding
with the award. On 11th August, 200 I, the Arbitrator received a fax from
H Fox & Mandal (representing HCL) requesting for extension of time for one
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] \ 63

month to put in a defence, pursuant whereto on 16th August, it was directed A
that any submission in support of an application for extension of time for
a defence and any submissions on the substantive merits of the dispute
together with any evidence relied in relation to the application and any
submissions made thereupon should be received by him by 31st August,
200 I in absence whereof he would not give any consideration thereto. On
27th August, 200 I, Fox & Manda! sought for a further three weeks' B
extension of time for making their submissions and serving supporting
evidence, pursuant whereto a time for filing those submissions of evidence
was extended until 12th September, 2001. Submissions containing about
seventy five pages were received by the Arbitrator on 13th September, 200 I
without any supporting evidence or any justification for not complying with c
the earlier orders passed by him. The Arbitrator, however, considered the
submissions made by HCL in making the award.

AWARD:

An award was passed by the said Arbitrator on 29th September, 200 I D
holding :

(i) the arbitration clause contained in clause 14 of the agreement is neither
· unlawful nor invalid.

(ii) the Arbitrator had jurisdiction to decide his own jurisdiction in terms
E
of Article 8.3 of the ICC Rules as also Section 16 of the 1996 Act.

(iii) the claim ofCentrotrade based on the report ofinspectorate Griffith was
just. The arbitration award dated 15th June, 1999 was obviously wrong.
There is no dispute about the actual figure of loss claimed by F
Centrotrade. There is no dispute as to the demurrage owing which, in
accordance with Clause 9.2 of the contract, is to be calculated on the
basis of a discharging rate of 1600 MT per WWD of 24 consecutive
hours.
G
(iv) Centrotrade is entitled to interest as well as costs.

It was directed:

"(l) HCL do pay Centrotrade the sum of$152,l 12.33, inclusive of
interest to the date of the Award in respect of the purchase price H
164 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A for the first shipment.

(2) HCL do pay Centrotrade the sum of $15,815.59, inclusive of
interest to the date of this Award in respect of demurrage due on
the first shipment.

B (3)..HCL do pay Centrotrade the sum of $284,653.53, inclusive of
interest to the date of this Award in respect of the purchase price
on the second shipment.

(4) HCL do pay Centrotrade their legal costs in this arbitration in
the sum of $82, 733 and in addition the costs of the International
c Court of Arbitration, the Arbitrator's fees and expenses totaling
$29,000.

(5) HCL do pay Centrotrade compound interest on the above sums
from the date of this Award at 6% p.a. with quarterly rests until the
D date of actual payment."

PROCEEDINGS BEFORE THE COURTS:

HCL filed an application purported to be under Section 48 of the 1996
Act in the Court of District Judge Alipore, Calcutta. HCL also filed a suit
E before the Civil Judge, Senior Division, Alipore which was marked as T.S.
No. 78 of 200 I praying for a ·declaration that the ICC award is void and a
nullity, as also for permanent injunction and damages.

Enforcement of Award :

F Centrotrade, in the meanwhile, filed an application for enforcement of
the said award dated 29th September, 2001 in the Court of the District Judge,
Alipore which was numbered as Execution Case No. I of 2002. Upon an
application made in terms of Clause 13 of the Letters Patents of the Calcutta
High Court by Centrotrade, the said execution case was transferred to the
G Calcutta High Court.

H
A learned Single Judge of the said court by a judgment and order dated
10th March, 2004 allowed the said execution petition. Aggrieved by and
dissatisfied therewith, HCL preferred an appeal which was allowed by reason
of the impugned order dated 20th May, 2004. Both the parties are before
us questioning the correctness of the said judgment.
I
.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] 165

HIGH COURT JUDGMENT: A

In its judgment, the High Court held:

(i) Although successive arbitration is not impermissible in India, but two
successive awards are mutually destructive.
B
(ii) In his award, Mr. Cooke did not make any statement that he was
overruling or setting aside or in any manner altering the Indian award.

(iii) Although the second award is binding on the parties but is not
enforceable having regard to the first .award. C
(iv) The second award is not a foreign award within the meaning of Section
44 of the 1996 Act and, thus, Section 34 thereof would apply thereto
in the facts and circumstances of the case.

(v) Neither Part II of the Act nor Section 51 thereof states anywhere either D
expressly or by necessary implication, that the definition of 'Foreign
Award' contained in Section 44 would apply notwithstanding the
proper law of the contract being Indian Law.

SUBMISSIONS .
E
Mr. S. Sarkar, learned senior counsel appearing on behalf of Centrgtrade
submitted that:

(i) In a two-tier arbitration, the second arbitration proceedings having
taken place in London, the award of Mr. Cooke was a foreign award F
within the meaning of Section 44 of the Act.

(ii) The learned Single Judge was satisfied that the HCL was not unable
to present his case in the arbitration proceedings within the meaning
of Section 48(1)(b) of the Act which finding having not been reversed
by the Division Bench, no case has been made out for setting aside the G
award. Even otherwise refusal of an adjournment by an Arbitrator is
not a ground for challenging an arbitral award.

Mr. Debabrata Ray Choudhury, learned counsel appearing on behalf
of the HCL, on the other hand, submitted that H
166 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A (i) The definition of an award as contained in Section 2(2) of the 1996
Act must be read with the other provisions thereof, viz., Sections 2(5),
2(6) and 2(7) as also Section 42 thereof in view of the fact that the
Indian law was applicable in relation to the contract in question.
-
(ii) Indian law in relation to enforcement of the terms and conditions of
B the contract being applicable, both the awards are governed by the
Indian law.

(iii) The second part of the arbitration agreement contained in Clause 14
of the agreement is void and of no effect being opposed to public
policy. Having regard to the fact that the first award was made in terms
c of the Indian law, reference to the second arbitrator was impermissible
inasmuch as the 1996 Act envisages only one award.

(iv) The object of the Act being to provide an integral framework and the
-
parties having chosen Indian law, even assuming that Part II of the Act
applies, Section 44 clearly makes an exception therefor in view of the
D decision ofthi> Court in Bhatia International v. Bulk Trading S.A. and
AnJther. (2002] 4 SCC 105.

(v) In any event, the Arbitrator did not give adequate opportunities of
hearing and as the procedures prescribed under the ICC Rules were not
followed, tht! award is liable to be set aside. The Arbitrator, having
E proceeded to prepare an award without the pleadings of the parties
before him and considering only the first part of the written statement
without waiting for the second part, misconducted himself at the
proceeding. Had an opportunity been given, HCL could have cross-
examined the expert on whose report, the award has been made.
F
(vi) Neither any issue was raised, nor any date was fixed for hearing and,
as the parties were not given an opportunity to examine the witnesses,
the award is liable to be set aside in terms of Section 48( I )(b) of the
1996 Act.

G (vii) The judgment of the High Court to the extent that the arbitration clause
has been held to be valid is erroneous.

VAUDITY OF THE AGREEi1IENT :

So far as the que>tion of validity of the arbitration agreement b~tween
H the parties is concerned, we may at the outset notice that the said question
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] 167

was specifically raised by HCL both before the learned Single Judge and the A
Division Bench of the High Court.

Both the learned Single Judge and the Division Bench held the said
arbitration agreement to be valid. The Arbitrator as also the High Court in
support of their findings on the said question relied upon the decisions of
the Calcutta High Court in Hirala/ Agarwal/a & Co. v. Jakin Nahopier & B
Co. Ltd., AIR (1927) Cal 647, the Bombay High Court in Faza/a//y Jivaji
Raja v. Khimji Poonji and Co., AIR (1934) Born 476 and the Madras High
Court in MA. Sons v. Madras Oil & Seeds &.change Ltd & Anr., AIR (1965)
Mad. 392.
c
We, at the outset, would notice the decisions and the authorities which
had been relied upon by the learned arbitrator as also by the High Court in
support of the proposition that a two tier arbitration constitutes a valid
agreement.

The question primarily before us is as to whether the validity of such
D
arbitration agreement can be upheld having regard to the provisions of the
1996 Act.

In Hanskumar Kishan Chand v. The Union of India, AIR (1958) SC
947, interpretation of Section 19 of the Defence of India Act, 1939 fell for E
consideration. Section 19( I) provides for payment of compensation if any
action is taken of the nature described in sub-section (2) of Section 299 of
the Government of India Act, 1935. Section 19(l)(a) provided for the
amount of compensation being fixed by the agreement whereas Section
19(l)(b) provided for reference to arbitrator in the event such an agreement
cannot be reached whose qualification was laid down under Sub-section (3)
F
of Section 220 of the said Act for appointment as a Judge of a High Court.
Section 19( I )(b) reads as under:

"Where no such agreement can be reached, the Central Government
shall appoint as arbitrator a person qualified under sub-section (3) G
of Section 220 of the abovementioned Act for appointment as a
Judge of a High Court."

Section 19(1)(c) provided for appointment by the Central Government
of a person having expert knowledge as to the nature of the property acquired
H
168 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A and for the nomination of an assessor by the person to be compensated for
the purpose of assisting tht: arbitrator. Section 19( I)( e) contemplated that
...
the arbitrator in making his award shall have regard to the provisions of sub-
section (I) of Section 23 of the Land Acquisition Act, 1894 so far as the
same can be made applicable. In terms of Section 19(1 )(f), an appeal shall
B lie to the High Court against an award of the arbitrator except in cases where
the amount thereof does not exceed an amount prescribed in this behalf by
rule made by the Central Government. Section 19( I )(g) provided that save
as provided in the said section and in any rules made thereunder nothing in
any law for the time being in force shall apply to arbitrations under that
C section. Construing the aforementioned provisions, this Court held:

"14. The principles being thus well-settled, we have to see in the
-
present case whether an appeal to the High Court under Section
19(l)(f) of the Act comes before it as a Court or as arbitrator. Under
Section l 9(l)(b i, the reference is admittedly to an arbitrator. He
D neec! not even be a Judge of a Court. It is sufficient that he is
qualified to be appointed a Judge of the High Court. And under the
law, no appeal would have laid to the High Court against the
decision of such an arbitrator. Thus, the provision for appeal to the
High Court under section 19(1 )(f) can only be construed as a
E reference to it as an authority designated and not as a Court. The
fact that, in the pre5ent case, the reference was to a District Judge
would not affect the position. Then again, the decision of the
arbitrator appointed under Section 19(l)(b) is expressly referred to
in Section l 9(l)(f) as an award. Now, an appeal is essentially a
F continuation of the original proceedings, and if the proceedings
under Section f9({)(b) are arbitration proceedings, it is difficult to
see how their character can suffer a change, when they are brought
up before an Appellate Tribunal. The decisions in The Special
Officer, Salsette Building Sites v. Dossabhai Bezonji. The Special
G Officer Salsette Building Sites v. Dussabhai Basanji Motiwala,
Manavikraman Tirumalpad v. The Collector of the Nilgris and
Secretary of State/ur India in Council v. Hindusthan Co-operative
Insurance Society Limited proceed all on the view that an appeal
against an award continues to be part of, and a further stage of the
original arbitration proceedings. Ir our view. a proceeding which
H
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] J69

is at the inception an arbitration proceeding must retain its character A
as arbitration, even when it is taken up in appeal, where that is
provided by the statute."

(Emphasb supplied)
'-_,,,
In Hiralal Agarwalla (supra), Ghose, J, speaking for a Division Bench B
of the Calcutta High Court dealing with almost an identical matter, was of
the opinion that a committee of appeal can hold a second round of arbitration,
whether described as a fresh set of arbitration or not, as the substance of the
matter has got to be looked at, and giving to the sections of the Indian
Arbitration Act, the very best consideration will the learned Judge find in c
it which would prevent an award by a committee being the final award
contemplated by the parties in certain eventualities being filed in the High
Court. It was observed that, 'in other words, the contract contains as it were
two submissions or a submission within a submission'. Ghose, J,, however,
did not go into the question as to whether the first award could be filed in
D
court. Buckland, J., concurring with the said judgment stated the law thus:

"The procedure whereby the dispute comes before body other than a
Court of justice to whom the parties have agreed to refer their dispute. Such
a proceeding is 'known to the law as an arbitration and those in whom the
arbitration is lodged are known as arbitrators or an umpire" E

In Fazalally Jivaji Raja (supra), the Bombay High Court followed
Hiralal Agarwalla (supra). It also referred to a judgment of another learned
't
Single Judge of the said High Court wherein it was observed :
F
"It is as much an award in respect of which the parties can seek
relief under the Arbitration Act as an ordinary award made by
arbitrators as contemplated by that Act from which there is no
appeal to any Board as in the present case. This point is covered
by the decision of the Court of appeal in (1893) l Q.B. 405, which G
has been referred to in the judgment of the lower Court. It is a
decision under the English statute of I889, corresponding to the
Arbitration Act, and the point that has been argued by Mr. Desai
on behalf of the appellants here was raised in that case and
disallowed."
H
170 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Yet again in M.A. Sons (supra), a Division Bench of the Madras High
Court following Hiralal Agarwalla (supra), observed :

"An award made pursuant to a proper arbitration agreement is final,
subject, of course, to the consequences of any such term of the
contract. Here, the agreement provided that the parties would abide
B by any modification or alteration in the by-laws as governing the
contract when it subsisted or was in issue between the parties. We
must, therefore, hold that the second respondent had a right of
appeal."

In 'The law of Arbitration' 7th Edition by S.D. Singh at page 359, it
c is stated :

"31. Hearing before Appeal Committees. Rules of certain Chambers
provide for an appeal against an award to an Appeal committee
constituted under arbitration rules of those Chambers, Managing
D Committees of these Chambers themselves act as appeal committees
and the rules also provide for the quorum of these committees to
hear appeals against an award. When provision is made for such
appeals, proceedings for the hearing of an appeal against an award,
are part of the proceedings in the reference."

E It is not necessary for us to comment on the correctness or otherwise
of the said decisions except observing that they were decided having regard
to the provision of the l 940 Act and not the 1996 Act. Question is whether
the said arbitration would be valid in terms of the provisions of the 1996
Act and in particular when two awards of the Arbitrators are governed by
F two different parts thereof.

THE 1996 ACT:

The United Nations Commission on International Trade Law
(UNCITRAL) adopted in 1985 the Model Law on International Commercial
G Arbitration. The General Assembly of the United Nations recommended that
all countries give due recognition thereto. The 1996 Act, as noticed
hereinbefore, seek to consolidate and amend the law relating to domestic
arbitration, international commercial arbitration, enforcement of foreign
arbitral awards and to define the law relating to conciliation taking into
account the said UNCITRAL Model Law and Rules.
H
CENTROTRADE MINERALS AND METAL INC.,., HINDUSTAN COPPER LTD. [SINHA, J.j 171

The "United Nations Convention on the Recognition and Enforcement A
of Foreign Arbitral Awards (New York, 10 June, 1958)", the New York
Convention in common legal parlance, has been ratified by India on 13th
July; 1960. By virtue of its Article VII, the Geneva Protocol on Arbitration
Clauses of 1923 ·and the Geneva Convention on the Execution of Foreign
Arbitral Awards of 1927 ceases to have effect between the contracting States.
Considering that the New York Convention has been ratified by 108 nations B
and less than five sovereign contracting states of the Geneva Convention
have not become signatories to the New York Convention, Chapter II of Part
II of the 1996 Act already has minimal applicability and may soon have none
at all, reducing that Chapter to a surplusage.

Prior to coming into force of the 1996 Act, all mall~rs relating to
c
arbitration, both domestic and foreign, was governed by several statutes, viz.,
the Arbitration Act, 1940 (for short "the 1940 Act"), Arbitration (Protocol
and Convention) Act, 1937 and the Foreign Awards (Recognition and
Enforcement) Act, 1961 (for short "the 1961 Act"). India is a signatory
to the UN Convention. The 1996 Act was enacted pursuant to the D
commitment of the Government of India to make an appropriate legislation
amending and consolidating the law in terms ofUNCITRAL Model Law and
Rules.

Chapter I Part I applies where the place of arbitration is in India, as
would appear from sub-section (2) of Section 2 of the 1996 Act. In terms
E
of sub-section (3) of Section 2, the said part would not affect any other law
for the time being in force by virtue of which certain disputes may not be
submitted to arbitration. Sub-section (4) of Section 2 reads as under :

"This Part except sub-section(!) of section 40, sections 41and43 F
shall apply to every arbitration under any other enactment for the
time being in force, as if the arbitration were pursuant to an
arbitration agreement and as if that other enactment were an
arbitration agreement, except in so far as the provisions of this Part
are in consistent with that other enactment or with any rules made
thereunder." G

Sub-section (7) of Section 2 provides that arbitral award made under
the said Part shall be considered as a domestic award. The interpretation
clause contained in Section 2 uses the words 'unless the context otherwise
requires'. Section 2(b) of the 1996 Act defines an "arbitration agreement" H
172 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A to mt:an an agreement refened to in Section 7. Section 7 defines an
arbitration agreement for the purpose of Chapter I to mean an agreement by
the parties to submit to arbitration all or certain disputes which have arisen
or which may arise between them in respect of a defined legal relationship
whether contractual or not. In Section 2( c) arbitral award has been defined
to include an interim award whereas in Section 44, foreign award has been
B defined to mean an arbitral award on differences between persons arising out
of legal relationships, whether contractual or not, considered as commercial
under the law in force in India in pursuance of an agreement in writing for
arbitration to which the Convention set forth in the First Schedule applies.
An arbitrator is appointed in terms of Section 11 of the Act. providing inter
c alia, therein that the parties are free to agree on a procedure for appointing
the arbitrator or arbitrators subject to sub-section (6) thereof. wherewith we
are not concerned in this case. Section 12 lays down the grounds for
challenging an award; sub-section (3) whereof provides :

"(3) An arbitrator may be challenged only if -
D
(a) circumstances exist that gives rise to justifiable doubts as to
his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the
parties."
E
Section 13 provides that the parties are free to agree on a procedure
for challenging an arbitral award. in terms whereof the jurisdiction of an
arbitrator on the grounds specified under sub-section (3) of Section 12 can
I
be questioned before the arbitrator himself. Section 16 authorizes the arbitral
F tribunal to rule on its own jurisdiction. Chapter 6 of the Act lays down the
rules applicable to the substance of a dispute, in terms whereof the arbitral
tribunal is required to decide the dispute submitted to arbitration in accordance
with the substantive law for the time being in force in India.

Sub-section (2) of Section 28 of the Act provides that the arbitral
G tribunal shall decide ex aequo et bona or as amiable compositeur only if the
parties have expressly authorized it to do so. Sub-section (3) thereof enjoins
a duty upon the arbitral tribunal to decide all cases in accordance with the
terms of the contract and to take into account the usages of the trade
applicable to the transaction. Section 31 provides for the fonn and contents
H of the arbitral award. Section 32 provides for termination of proceedings;
CENTROTRADE MINERALS AND METAL INC. r. HINDUSTAN COPPER LTD. [SINHA, J.) J 73

in terms of sub-section (I) whereof the arbitral proceedings shall be A
terminated by the final arbitral award or by an order of the arbitral tribunal
under sub-section (2).

An application for setting aside an arbitral award can be filed in terms
of Section 34 which occurs in Chapter Vil of the 1996 Act. Sub-section (2)
of Section 34 lays down the grounds upon which such arbitral award can B
be set aside. Such an application is required to be filed within three months
from the date on which the parties making that application had received the
arbitral award. The court, however, has jurisdiction to entertain such an
application within a further period of thirty days, but not thereafter.

Section 35 postulates finality of an arbitral award. Such an award is
c
binding not only on the parties but also on persons claiming under them
respectively. Section 36 of the 1996 Act reads as under:

"Enforcement.- Where the time for making an application to set
aside the arbitral award under section 34 has expired, or such D
application having been made, it has been refused, the award shall
be enforced under the Code of Civil Procedure, 1908 (5 of 1908)
in the same manner as if it were a decree of the Court."

The expression 'Arbitral Award has not been defined in Part I, but the E
expression 'foreign award' has been defined in Section 44 of Part II, which
reads as under :

"44. Definition.- In this Chapter, unless the context otherwise
requires, "foreign award" means an arbitral award on differences
between persons arising out of legal relationship, whether contractual F
or not, considered as commercial under the law in force in India,
made on or after the I Ith day of October, 1960

• (a) in pursuance of an agreement in writing for arbitration to
which the Convention set forth in the First Schedule applies,
and
G

(b) in one of such territories as the Central Government, being
satisfied that reciprocal provisions have been made may, by
notification in the Official Gazette, declare to be territories to
which the said Convention applies." H
174 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Whereas Part I deals with the domestic arbitration, Part II deals with the
enforcement of certain foreign awards.

We may notice that Section 9(b) of the 1961 Act contained that nothing
in that Act would apply to any award made on an arbitration agreement
governed by the law of India. Part II of the 1996 Act makes an exception
B to the effect that unlike Section 9(b) of the 1961 Act, it makes the position
absolutely clear that the character of an award is determined by the place
where it is made.

Section 48 provides for conditions for enforcement of foreign awards.
c Section 49 lays down that where the court is satisfied that the foreign award
is enforceable under the said chapter, the award shall be deemed to be a
decree of that court.

The 1996 Act contains a coherent and model framework. It envisages
only one award under one set of rules. I: does not contemplate multi-layer
D awards governed by different sets of rules. It has introduced several changes
of which three are worth taking note of: (i) fair resolution of a dispute by
an impJrtial tribunal without any unnecessary delay or expenses; (ii) Party
autonomy is paramount subject only to such safeguards as are necessary in
public intere<;t; and (iii) The arbitral tribunal is enjoined with a duty to act
E fairly and impartially.

The important shortcomings that are very much apparent from bear
reading of the Arbitration and Conciliation Act, l 996 can be said as follows:
•
F (i) No provision is made for expediting awards or the subsequent
proceedings in Courts where applications are filed for setting
aside awards.

(ii) An aggrieved party has to start again from the District court for
challenging the award.
G
In this respect it would be pertinent to mention about Arbitration and
Conciliation (Amendment) Bill, 2003. It was based on the comprehensive
review of the Arbitration and Conciliation Act 1996 undertaken by the Law
Commission of India in its l 76th Report. Few of the salient features of the
H Bill are:
CENTROTRADE MINERALS AND METAL INC v. HINDUSTAN COPPER LTD. [SINHA. J.] 175

(i) it provides that where the place of arbitration is in India, Indian A
Law will apply whether the arbitration is between the Indian
Parties or an International arbitration in India.

(ii) it also provides for the Arbitration Division in the High Courts
and also for its jurisdiction and special procedure for enforcement
of awards made under the Arbitration Act, 1940 including awards B
made outside India.

DIFFERENCE BETWEEN THE 1996 ACT AND THE 1940 ACT:

The 1996 Act makes a radical departure from the 1940 Act. It has C
embodied the relevant rules of the modem law but does not contain all the
provisions thereof. The 1996 Act, however, is not as extensive as the English
Arbitration Act.

Different statutes operated in the field in respect of a domestic award
and a foreign award prior to coming into force of the 1996 Act, namely, the D
1940 Act, the Arbitration (Protocol and Convention) Act, 1937 and the
Foreign Awards (Recognition and Enforcement) Act, 1961. All the
aforementioned statutes have been repealed by the 1996 Act and make
provisions in two different parts, namely, matters relating to domestic award
and foreign award respectively. E
The Scheme of 1996 Act is absolutely distinct and different from the
1940 Act as also the 1961 Act.

In the 1940 Act, no reason was required to be stated in the award unless
otherwise agreed upon. In the 1996 Act, reasons are required to be stated F
unless agreed to otherwise by the parties. The court's intervention is sought
to be minimized under the provisions of the 1996 Act not only having regard
to the concerns expressed in the international community as regard delay in
the arbitration proceedings but also in view of the fact that an award under
the 1996 is to be a reasoned one. In a large number of judgments, this Court G
has emphasized that the extent of power of the court's intervention in relation
to a reasoned award and unreasoned one would be different. Whereas in
relation to an unreasoned award, the court's jurisdiction to interfere with the
award was absolutely limited, a greater latitude had been given in relation
• to a reasoned award.
H
176 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A After the 1996 Act came into force, under Section 16 of the Act the
party questioning the jurisdiction of the arbitrator has an obligation to raise
the said question before the arbitrator Such a question of jurisdiction could
be raised if it is beyond the scope of his authority. Such a question was
required to be raised during arbitration proceedings or soon after initiation
thereof as a preliminary issue. Such a decision would be subject to challenge
B under Section ~4 of the Act. In the event, the arbitrator opined that he had
no jurisdiction in relation thereto an appeal thereagainst was provided for
under Section 37 of the Act.

In terms the 1940 Act, an award was required to be made a rule of court.
C In such a proceeding, an objection in terms of Section 30 of the 1940 Act
would be entertained. Sub-section (2) of Section 30 of the 1996 Act enjoins
a duty upon the Arbitrator to promote settlement. Such an application was
required to be filed within the period specified therefor under the Limitation
Act, 1963.

D Section 31 of the 1996 Act is in tune with Article 31 of the Model Law.
The requirements contained therein, most of which are mandatory, are
specified therein. Whereas under the 1940 Act only an interim award or final
award could be made; four types of awards are contemplated under the 1996
Act, viz .. interim award, additional award. settlement or agreed award and
E final award.

Section 33 of the 1996 Act clearly postulates that the Arbitrator has the
jurisdiction to correct and interpret an award in terms whereof, he may
amend his core award.
F
AWARD UNDER THE 1996 ACT:

G
Section 34 of the Act provides for the mode and manner in which an
arbitral award can be questioned. Such a course can be taken only by filing
an application which shall be in accordance with sub-section (2) and sub-
section (3 ). An award in the Indian part of the award, thus, could be set
.-
aside only by filing an application. The law, therefore, does not contemplate
that despite the rigour of Section 34 of the Act, an award which although
not challenged and becomes enforceable and executable still can be subject
matter of a foreign award. An award as soon as it becomes enforceable, it •
H becomes final and binding in tt:rrns of Section 35 of the Act.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] J77

The award, which is finally being either made by way of partial award A
or final award, after the expiry of a period of thirty days becomes a decree
in terms of Section 36 of the 1996 Act. When an award has been made,
signed and delivered to the parties, it is final and binding on the parties and
persons claiming under them respectively.

B
By reason of Section 36 of the 1996 Act, a legal fiction has been created
to the effect that on expiry of the period prescribed for setting aside an award
as envisaged under Section 34 of the Act, the award becomes capable of
being executed and enforced. The concept of provision for an appeal before
another forum from an award and that too when a part of the award would
.. be a domestic award and another part would be a foreign award is not c
contemplated under the 1996 Act.

An appeal as against an award in terms of an agreement may be or may
not be filed within the time specified under Section 34 of the Act. Even the
appellate arbitrator (if we may use the said tenn) would have no jurisdiction D
to pass an order of injunction staying the operation of the original award of
the arbitrator. The 1996 does not contemplate that only because an appeal
has been filed against the award, the time envisaged under Section 34 shall
cease to run. If during pendency of the so-called appeal an award becomes
a decree, the appellate arbitrator cannot set aside the said decree. An appeal
contemplates that the procedure before both the authorities would be the
E
same. An appeal is a continuation of the same proceeding. It does not
comprehend two different procedures, two separate sets of evidences. An
appeal does not take away the nature of the award. In other words, two
different nature of the awards is not contemplated; only because there is a
provision for appeal. We are not oblivious of the fact that rules of some F
chambers contemplate such a provision but in such an event the one that is
made by the first arbitrator does not become final. The appeal committee
follows the same procedure, relies upon the same evidence unless additional
evidence either by consent of the parties or otherwise is permitted. By reason
of such a procedure applicability of different set of rules is not envisaged. G
It is within the same jurisdiction. It does not contemplate two different and
distinct jurisdictions. But in the present case, parties were not bound by any
such agreement of trade or community association. As the parties were
individual companies and only guided by their agreement, the above
situation may not be applicable.
H
178 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A It is not in dispute that the provisions contained in Part I and Part II
of the 1996 Act are distinct and different. Procedures for enforcing such
awards are different. Consequences of the awards made under two different
parts are absolutely different.

What can be contemplated under the UNCITRAL Model Rule is Med-
B Arb contracts or similar such contracts and not a contra<::t of present nature.

According to Section 34(3) of the 1996 Act, the maximum period of
limitation for making an application is three months from the date on which
the applicant had received the arbitral award or the request under section 33
c was disposed of and another thirty days from the last day of the third month.
Section 34 which refers to "challenge to arbitral award" strives to balance
between the party autonomy and judicial control of the arbitral result with
the object of speed and efficiency. The balance has to come down strongly
in favour of finality, and against judicial review, except in few circumstances.
So, the main object of the provision is to detennine that whether the award
D has become final and bindin3 or not. Thus, the section depicts a position
whereby an arbitral award can be challenged for the purpose of setting aside
of the same at the first instance without much delay. The Court would set
aside the award only on certain circumstances. Thereby, it is the legislative
intention that such a matter is settled without much delay or much intervention
E of court. So, the finality of the challenged award would be decided by Court
under section 34 of the 1996 Act and appeals are allowed against certain
orders of courts or tribunals on certain grounds under Section 37 of the Act
[Furthennore, section 37(3) provides that no second appeal shall lie from an
order passed in appeal, although it does not take away the right to appeal
in Supreme Court]. Throughout, the provisions nowhere it is mentioned that
F
an appeal can be made or an application can be filed against the award to
a separate arbitration board or forum. So, the finality and legality has to be
detennined by the Court if it is so challenged. Otherwise, reference to a
second arbitration panel would consume more time as arbitrators would
decide the matter after listening the dispute afresh. Presuming that the
G reference to the arbitrator is made for second time and subsequently
arbitrator gives an award, it would be more time consuming and complex
if validity of the first award is challenged along with second award. So,
following the scheme of the 1996 Act, it is more viable and convenient to
accept the first award without opting for second time arbitration and then
H to decide it, if the award is challenged.
CENTROTRADE MINERALS AND METAL li'C. v. HINDUSTAN COPPER LTD. [SINHA, J.] 179

There can be a situation where an appeal is made against foreign award A
decided and settled abroad and the appeal will be made in India according
to our domestic statute. For example, when one of the parties is an
international company or organisation, first the arbitration will be done
according to New York Convention in foreign country and thereafter, ifthere
... is any grievance against the award challenge can be made in India under the
Act of 1996. B

Even the principles analogous to Order XL!, Rule 1 of the Code of Civil
Procedure envisages that filing of an appeal shall automatically not mean
stay of the operation of the decree. In that view of the matter, mere filing

- of an appeal would not make the award unenforceable. No prayer for stay
of the operation of the award had been prayed for nor the appellate arbitrator
had directed stay of the operation of the award. The 1996 Act does not
c
contemplate that the arbitrator would be entitled to sit in appeal over an
executable decree. Even the doctrine of merger shall not apply inasmuch
as the said doctrine contemplates an appellate authority who can pass the
same type of order which could be passed by the original authority. If by D
fiction of law an award becomes a decree without the intervention of the
court, the nature of an award which can be passed by the appellate arbitrator,
would loose the character of an award. The doctrine of merger, therefore,
would not apply. A decree, whether by reason of a statute or a legal fiction
created under the statute, would have different and distinct connotation vis-
E
' -vis an award. By agreement of the parties, a private adjudicator cannot
sit in appeal over an enforceable decree. A decree passed by a court of law
may be set aside by that court itself in exercise of its review jurisdiction or
by an appellate court created in terms of a statute. A private adjudicator,
it will bear repetition to state, cannot overturn a decree created by a legal
fiction. A legal fiction, it is well settled, must be given its full effect. [See F
Bhavnagar University v. Palitana Sugar Mill (P) Ltd and Others, [2003]
2 SCC 11 l; Ashok Leyland Ltd v. State ofT.N And Another, [2004] 3 SCC
1 and Bharat Petroleum Corporation Ltd. v. P. Kesavan and Another, [2004]
9 sec 772.J

A domestic award, in view of the statutory scheme, is subject to the
G
supervision of a court oflaw. Its jurisdiction encompasses within its purview
over the entire process of arbitration. An award is finally subject to a party
agreeing to take recourse to the provisions of Section 34 of the 1996 Act
and it becomes a decree. An award can be set aside only if the court comes
to the conclusion that one or the other grounds contained in Section 34 of H
180 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.
J.
A the Act exist. A challenge to the domestic award can, thus, be made only
before a national court designated by the Act itself and on the grounds
specified in Section 34 of the Act. A fortiori, the validity of a domestic award
cannot be questioned before any other forum including the forum chosen by
the parties, if any.
B
We may also notice that Section 66 of the English Arbitration Act
provides for obtaining leave from the court for enforcing an award. The
Indian law does not contain such a provision. Therefore, if a leave is not
granted, a claimant may pursue an independent cause of action which accrues

c
when an award is not honored. Sub-section (3) of Section 66 of English
Arbitration Act provides that leave to enforce shall not be given where, or
to the extent that, the person against whom it is sought to be enforced shows
that tr.e tribunal lacked substantive jurisdiction to make the award. Section
-
34 of the Indian Arbitration Act does not make such a provision. But, the
Indian law is also to be construed in the light of the Model Rule.. Model
D Rules being referred to as the 1996 Act does not contain any specific
provision in this behalf where, thus, the domestic law is silent, the court may
interpret a provision in the light of the international conventions. [See
Liverpool & London SP. & I Assun. Ltd v. M. V Sea Success!, [2004] 9
SCC 512; Pratap Singh v. State uf Jharkhand, (2005] 3 SCC 55 l and Zee
E Telefilms ltd. v. Uniun of India, [2005] 4 SCC 649] UNCJTRAL Model
Rule does not contemplate such a situation.

Jl'R!SDJCTWN ISSUE:

An award made on the basis of an invalid agreement would be a nullity.
F
Such an award would be curam nonjudice. [See Smith v. East Elloe Rural
District Council, [ 1956] I All ER 855]. The law in this behalf in India is
clear and explicit. An order passed by a Tribunal lacking inherent
jurisdiction would be a nullity. Where such a lack of jurisdiction is
established, the same goes to the root of the matter. [Balvant N Viswamitra
G and Others v. Yadav Sadashiv Mule (Dead) Through LRS. and Others,
12004 J 8 sec 706].

The 1996 Act, puts domestic awards and foreign awards in two
different and distinct compartments, subject of course to certain overlapping
H provisions as has been noticed in some decisions of this Court.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] J8 J

It may not, therefore, be possible to hold that the 1996 Act contemplates A
that an arbitration award can be an admixture of domestic award and foreign
award.

The 1996 Act in no uncertain terms speaks of an arbitration agreement,
as would appear from the interpretation clause contained in clause 2(b) as
also Section 7 thereof, which excludes the concept of two tier arbitration B
capable of being enforced under two different chapters.

A multi-tier arbitration may be held to be operative and valid when
it was governed solely by the 1940 Act or the 1961 Act inasmuch as in such
C
-
an event, the procedure laid down therein could have been followed. The
1996 Act, however, on the other hand, repeals and replaces not only the 1940
Act but also the 1961 Act and provides for different forums and different
procedures for resolution of a dispute through an arbitrator. lt is inconceivable
that one part of the arbitration agreement shall be enforceable as a domestic
award but the other part would be enforceable as a foreign award. An award
made in terms of one arbitration agreement can either be a domestic award
D
or a foreign award; wherefor different procedures have been laid down, even
when the consequences from such award are different and when the grounds
thereof are also different and distinct. The fundamental legislative policy
brought out by the 1996 Act, thus, being not in consonance with having two
tier arbitration which had two different statutes governed by two different E
provisions and would be subject to different procedures, in our opinion, is
not valid. Whereas, in the decisions and authorities relied upon by Mr.
Cooke, the second arbitration was also before the same institution governed
by the laws of the same country, in the instant case, the Indian law would
be applicable in relation to the first part of the arbitration, namely, the Indian
F
Council of Arbitration, whereas second part thereof would be governed by
International Chamber of Commerce, Paris Rules. Both parts of the
arbitration proceeding, therefore, have not been carried out under the same
institution. An arbitration agreement envisioning different procedures at
different stages cannot be countenanced under the 1996 Act. Had the appeal
been provided within the set-up of Indian Council of Arbitration, subject to G
the compliance of time frame, probably the agreement would have been
valid. But, it is not so. As observed in Hirata! Aganvalla (supra), such a
submission must be within a submission. In such an event the first award
may not be capable of being filed in court to which question Ghosh, J. did
not go into. H
182 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A A person may waive his right. Such waiver of right is permissible even
in relation to a benefit conferred under the law. But it is trite that no right
can be waived where public policy or public interest is involved. Jurisdiction
on a tribunal/ court is a creature of statute. Jurisdiction on Arbitration can
be conferred by agreement between the parties. But, the contract between

B
the parties must be in obedience to law and not in derogation thereof.
Contracting out is permissible provided it does not deal with a matter of
.
public policy. An agreement under no circumstances can violate the Public
Policy.

The appellate Arbitrator. therefore, could not have made an award in
C terms whereof a deemed decree passed by a court of India capable of being
enforced in terms of Section 34 of the 1996 Act would stand set aside. The
said award, therefore, is contrary to the legislative policy in India.
-
A jurisdictional issue can be raised in two ways. A party to an
arbitration proceeding may take part in arbitral proceedings and raise the
D que"tion of jurisdiction before the arbitral tribunal. He may also challenge
the jurisdiction of the arbitrator without participating in the arbitral proceedings.

Under the English Arbitration Act, an appeal on jurisdiction would
involve rehearing of the matter by the court at which the party can adduce
evidence and reargue the .:ntire issue of evidence. There is absolutely no
E reason as to why the said principle shall not apply to India. If a jurisdictional
issue can be raised before the court even for the first time. the court would
be entitled to take on records even the fresh hearing, it goes without saying
that it would also be entitled to determine the jurisdictional fact.

F In Primetrade AG v. Ythan Ltd, (2006] I All ER 367, jurisdictional
issue based on interpretation of documents executed by the parties fell for
consideration having regard to the provisions of the Carriage of Goods by
Sea Act, 1992. It was held that as the appellant therein did not become holder
of the bills of lading and alternatively as the conditions laid down in Section
2(2) were not fulfilled, the arbitrator had no jurisdiction to arbitrate in the
G disputes and differences between the parties.

PUBLIC POLICY :

Lord Mustill had once said that "The great advantage of arbitration is
H that it combines strength with flexibility .... Flexible because it allows the
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA,!.] 183

contestants to choose the procedure which fit nature of the dispute and the A
business context in which it occurs." Arbitration was meant to be a speedy,
expeditious and cost-effective method of dispute reconciliation. So, the
primary object of ADR movement is avoidance of vexation, expense and
delay and promotion of the ideal of "access to justice".

But, then the contract must be within the legal framework. B
In terms of the laws of India governing the field, the parties cannot
contract out of the statute and take recourse to such a procedure which would
for all intent and purport make the provisions of Sections 34 and 36 of the
1996 Act nugatory by entering into contractual arrangement or otherwise.
c
- The 1996 Act does not postulate that the parties can contract out of the
provisions thereof. The arbitration agreement of the parties, therefore, must
be made strictly in terms of the provisions of the 1996 Act.

The Arbitration Act, 1991 (the Statute of Canada) which is amended
by the Statutes of Ontario, 2006 expressly provide for "Contracting Out" D
under which the parties to an arbitration agreement may agree, expressly or
by implication, to vary or exclude any provision of this Act except few
circumstances, like, equality and fairness, setting aside of award, enforcement
of award, etc.

Contracting out of the appeals procedure is possible before any dispute E
arises in all cases under the Arbitration Act, 1996 (U.K.). The Act contains
express provision that every award shall contain reasons unless it is an agreed
award or the parties have expressly agreed to dispense with the reasons
(Section 52). The parties may want to dispense with reasons if neither side
is contemplating an appeal and they do not want to incur the additional costs
involved. Thus control over whether reasons should be given will be placed
F
in the hands of the parties, rather than in the hands of the arbitral tribunal
or the court.

The Act confers a number of powers on the arbitral tribunal unless
parties otherwise agree. For example, under Section 48, under Section 35, G
and under Section 39. There are also powers conferred on the court but whieh
are nevertheless subject to the contrary agreement of the parties, such as to
entertain appeals on questions of law in limited arbitration, also to take
certain other steps short of dismissal where a party fails to comply with a
peremptory order Section 47 to make awards on different issues.
H
184 SUPREME COURT REPORTS [2006] SUPP. 2 S.CR.

A But Indian statute. i.e., the 1996 Act does not provide such "contracting
out" provision so that parties can fix! detennine. by their tenns of agreement,
the procedure of appeal after the award is made.

Such a contractual arrangement, having regard to the prov1s10ns
contained in Section 23 of the Indian Contract Act shall be void being
B opposed to public policy. The parties. it is trite, cannot by contract or
otherwise confer jurisdiction on a forum which is prohibited by law in force
in India. The law in force in India does not pennit to limit or avoid the
operation of the statutory provisions.

The expression 'public policy' in India has been used for three different
c situations, namely, (i) an arbitral award may be set aside under Section
34(2J(b) of the 1996 Act if it is in conflict with the public policy of India;
(ii) enforcement of a foreign award (New York Convention Award) may be
refused under Section 48(2)(b) if the enforcement of the award would be
-
contrary to the public policy of India; and (iii) a foreign award (Geneva
D Convention Award) may be enforceable under Section 57(l)(b) if the
enforcement of the award is not contrary to the public policy or law of the
India.

The expression 'public policy' will have the same connotation in
respect of an arbitration agreement or an award. The judicial intervention
E in such mattt:rs has never been free from difficulty. Whereas refusing
enforcement of an arbitral award has been viewed with much skepticism. the
English Courts are more often than not have refused to enforce a foreign
award on public policy ground holding that common law recognizes that
English public policy is paramount. In some jurisdiction even serious
F procedural defects in the arbitral proceedings had been held to provide for
enough justification for refusal to afford foreign award. [Russell on
Arbitration. 22nd edition, 2003, page 389, para 8-046 and Chitty on Contract,
29th edition, 2004, page 961, para 16-045]. We do not see any reason as
to why the Indian law should be held to be different.

G Even under the 1940 Act, this Court in Renusagar Power Co. Ltd v.
General Electric Co .. (1994] Supp. I SCC 644 laid down that the arbitral
award can be set aside if it is contrary to: (a) fundamental policy of Indian
Law. (b) the interests of India; or (c) justice or morality A narrower meaning
to the expression ·public policy' was given therein by confining the scope
H of judicial review intervention of the arbitral award only when the
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [SINHA, J.] 185

aforementioned three grounds set forth therein. An apparent shift can, A
however, be noticed from the decision of this Court in Oil and Natural Gas
Corporation Ltd. v. Saw Pipes Ltd., (for short 'ONGC'), (2003] 5 SCC 705.
This Court therein referred to an earlier decision of this Court in Central
Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, [1986]
3 sec 156 wherein the applicability of the expression 'public policy' on the
touchstone of Section 23 of the Indian Contract Act and Article 14 of the B
Constitution of India came to be considered. This Court therein was dealing
with unequal bargaining power of the workmen and the employer and came
to the conclusion that any term of the agreement which is patently arbitrary
and/ or otherwise arrived at because of the unequal bargaining power would
not only be ultra vires Article 14 of the Constitution of India but also hit c
by Section 23 of the Indian Contract Act. In ONGC (supra), this Court apart
from the three grounds stated in Renusagar (supra) added another ground
thereto for exercise of the court's jurisdiction in setting aside the award if
it is patently arbitrary stating:

"What is for public good or in public interest or what would be D
injurious or harmful to the public good or public interest has varied
from time to time. However, the award which is, on the face of it,
patently in violation of statutory provisions cannot be said to be in
public interest. Such award/judgment/decision is likely to adversely
affect the administration of justice. Hence, in our view in addition
E
to narrower meaning given to the term "public policy" in Renusagar
case it is required to be held that the award could be set aside if
it is patently illegal. The result would be award could be set aside
if it is contrary to:

(a) fundamental policy of Indian law; or F
(b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.
G
Illegality must go to the root of the matter and if the illegality is
of trivial nature it cannot be held that award is against the public
policy. Award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the court. Such award
is opposed to public policy and is required to be adjudged void." H
186 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A By referring to the aforementioned decisions, we do not mean to say
that we agree with the law laid down therein but we have referred thereto
only for the purpose of finding out whether the expression 'public policy'
is construed narrowly or broadly. It does not, however, make any substantial
difference for determining the question in the sense that arbitration agreement
contained in clause 14 is opposed to public policy as it is violative of the
B Indian statutes.

Section 23 of the Indian Contract Art, 1872 embodie~ the doctrine of
public policy as evolved by the common law. It takes within its sweep
transactions:
c (i) the consideration or object whereof is forbidden by law; or

(ii) of such a nature, if pennitted, would defeat the provisions of any
law; or

D (iii) if fraudulent or involves or implies injury to the person or
property of another where the court regards it immoral. or
opposed to public policy.

In various decisions, this Court has taken into consideration some of
the well-known authorities for detennining the que~tion as to whether the
E executive can be given a power to decide as to what would be a public policy.

In Godawat Pan Masala Products J.P. ltd. v. Union of India, (2004]
7 sec 68, it was held that it is always in the domain of the judiciary to
interpret what is morality at a given point of time.

F The doctrine of public policy undoubtedly is governed by precedents.
Its principles have been crystalised under different heads. [See Gherulal
Parakh v. Mahadeodas Maiya, (1959] Supp. 2 SCR 406; Central Inland
Water Transport Corpn. ltd. v. Brojo Nath Ganguly, (1986] 3 SCC 156;
Zoroastrian Coop. Housing Society ltd. v. District Registrar, Coop. Societies •
G (Urban), (2005] 5 sec 632 and State of Rajasthan and Others V. Basant
Nahata, [2005] 12 SCC 77.

In the 1940 Act, there was no specific provision for setting aside the
arbitration award on the ground that the same was in conflict with the public
policy in India. Section 30(c) was hdd to be wide enough to cover the heads
H generally comprehended by the expression "public policy".
CENTROTRADE MINERALS AND METAL INC.,., HINDUSTAN COPPER LTD. [SINHA. J.) 187

In Dharma Prathishthanam v. Madhok Construction Pvt. Ltd, [2005] A
9 SCC 686 = (2004) 3 Arb. LR 432(SC), a 3-Judge Bench of this Court held
that where the appointment of an arbitrator and the reference of a dispute
to him is void ab initio, the resulting award would also be liable to be set
aside being totally incompetent or invalid. Thus, if an award is set aside to
be enforced, the same may be declined for the reason that it is nullity,
B
incapable of being enforced.

An agreement which is illegal would vitiate the arbitration agreement
as also an award, but in some cases an arbitration agreement may be valid
or even the arbitrator may determine the question of illegality of the contract.
[See : Harbour Assurance Co (UK) Ltd. v. Kansa General International Co. C
Ltd., [1993) 3 All ER 897. What would, however, be the nature of the
illegality would depend upon the law in force of the country.

An arbitration agreement must satisfy the requirements of its definition
as contained in Section 7 of the Arbitration Act. Within the meaning of
D
Section 7, an arbitration agreement must mean a valid arbitration agreement.
Section 44 of the Arbitration Act defines a foreign award. The said
definition, however, would not apply where 'unless the context otherwise
requires' clause is attracted.

A definition clause, therefore, does not necessarily apply in all possible E
contexts in which the word may be found therein. The expression came to
be considered in a decision of this Court in Bennett Coleman and Co. (P)
Ltd. v. Punya Priya Das Gupta, [1969) 2 SCC I wherein it was held that
the definitions of 'a newspaper employee' and 'a working journalist' have
to be construed in the light of and subject to the context unless otherwise F
required.

An award made outside India, even if governed by Indian law, may be
a foreign award but it must satisfy two conditions, viz., that it is made (i)
in pursuance of an agreement in writing for arbitration to which the New
York Convention applies and (ii) in one of such territories which the Central G
Government has notified in the Official Gazette to be a territory to which
the New York Convention applies. In this case, it appears that New York
Convention does not apply in its entirety in the sense that the first part of
the award would be governed by the ICA Rules whereas the second part
would be governed by Paris Rules. H
188 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A The question as regard the legislative policy vis-a-vis the arbitration
agreement, therefore, will have to be considered from the said angle.

In Montrose Canned Food~ Ltd. v. Eric Wells (Merchants) Ltd., ( 1965)
Lloyd's Rep 597, where buyers alleged various procedural defects in
arbitration proceedings, and applied to the court for an order setting a:;ide
B or remitting the award, Megaw J held that he had the jurisdiction to make
an order despite the existence of an appeal procedure and he exercised his
discretion to remit the award. Magaw J proceeded on the basis that there was
no contractual provision requiring the buyers to exhaust appeal procedure
before applying to the court for review. This may raise the question whether
C it is permissible to exclude any right of access to the courts pending the
hearing of an appeal. Megaw J assumed that such provision would be valid.
But there should be question whether riles of that type can survive the public
policy rule that the parties cannot oust the jurisdiction of the courts.

In Brace Transport Corporation of Monrovia, Bermuda v. Orient
D Middle East Lines ltd., Saudia Arabia and others, AIR ( l 994) SC 1715, this
Court held that when a court is asked to enforce an award, its legal effect
must not only be recognized but legal sanctions must also be granted to
ensure that it is carried out. If an award is a nullity, question of its
enforcement would. thus, not arise.
E
It is of some significance to note that in terms of Section 45 of the 1996
Act. the court may refer the parties to arbitration unless it finds that the said
agreement is null and void. Thus, if a court while exercising its jurisdiction
under Section 45 of the 1996 Act is required to arrive at a finding as regards
F validity of the arbitration agreement, there is absolutely no reason as to why
it cannot do so while enforcing an award.

If the parties did not expressly make a choice of the law governing the
arbitration agreement, a presumption would arise that the proper law
governing the arbitration would be the same as law of the country in which
G arbitration is agreed to be held. ~ub-section (2) of Section 2 of the l 996
Act categorically states that Part I would apply where the place of arbitration
is in India and. thus. by necessary implication. ousts the applicability thereof
if the place of arbitration is outside India, subject, may bi:, to just exceptions.

H Clause 16 of the agreement reads as under:
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. (SINHA. l.] J 89

"16. Construction: A
The contract is to be constructed and to take effect as a contract
made in accordance with the laws of India."

In the instant case, indisputably, the law which would govern the
arbitration agreement is, in view of Clause 16 of the agreement, the Indian B
Law.

We are not unmindful that the decision of this Court in Oil & Natural
Gas C01poration Ltd. V. Saw Pipes Ltd, [2003] 5 sec 705 had invited
considerable adverse comments but the correctness or otherwise of the said
decision is not in question before us. It is only for a larger Bench to consider C
the correctness or otherwise of the said decision. The said decision is binding
on us. The said decision has been followed in a large number of cases. [See
The Law and Practice of Arbitration and Conciliation by O.P. Malhotra,
Second edition, page 1174.]

In the said treatise, the learned author has considered the correctness
D
of ONGC (supra) from a large conspectus and opined at page I 184-1185:

"This survey of the contemporary English and Indian authorities
reveals no justification to fault ONGC. It is carefully calibrated
judgment supported by research into comparative law and sound E
rationale. This decision only modifies and expands the scope of
public policy of India as adumbrated in Renusagar. It adds one
more head, i.e., patent illegality of the award provided that the
illegality goes to the root of the matter or is so unfair and
unreasonable that it shocks the conscience of the court. Contrarily,
it supports Renusagar in Jetter and spirit. If the court had not so F
modified the law, it would have failed in its duty to prevent
subversion of societal goals and endangering the public good .. "

One may agree with the said view of the learned author or may not but,
as at present advised, ·we have to abide by the decision in ONGC (supra) and,
thus, the doctrine of public policy must be held to be a ground for setting
G
aside an arbitration agreement and consequently an award.

Such patent illegality, however, must go to the root of the matter. The
public policy, indisputably, should be unfair and unreasonable so as to shock
the conscience of the court. Where the Arbitrator, however, has gone H
190 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R.

A contrary to or beyond the expressed law of the contract or granted relief in
the matter not in dispute would come within the purview of Section 34 of
the Act.

What would be a public policy would be a matter which would again
depend upon the nature of transaction and the nature of statute. For the said
B purpose, the pleadings of the parties and the materials brought on record
would be relevant so as to enable the court to judge the concept of what was
a public good or public interest or what would otherwise be injurious to the
public good at the relevant point as contradistinguished by the policy of a
particular government. [See State of Rajasthan v. Basant Nahata, [2005]
c 12 sec 77.

It is not in dispute that the conditions precedent for applying Part II
of the I 996 Act have not been fulfilled in the instant case. Section 5 I thereof
to which reference has been made provides for a saving clause in relation
to a right which had accrued to a party. A fine distinction exists between
D 'to detennine proper law' and 'to determine proper forum of court'. The
effect of a foreign award is different from the effect of the domestic award.
In terms of Section 46 of the Act, the foreign awards are binding.

PRECEDENTS :

E We may at this juncture notice some of th~ decisions cited at the Bar.

In National Thermal Power Corporation v. The Singer Company and
others, AIR (1993) SC 998, this Court was construing the provisions of the
I96 I Act. Wl:at would be the proper law in the context of an arbitration
F proceeding was stated, thi;s:

"Proper law is thus the law which the parties have expressly or
impliedly chosen, or which is imputed to them by reason of its
closest and most intimate connection with the contract. It must,
however, be clarified that the expression 'proper law' refers to the
G substantive principles of the domestic law of the chosen system and
not to its conflict of laws rules. The law of contract is not affected
by the doctrine of renvoi. (See Dicey, Vol. II, p. 1164.)"

In Sumitomo Heavy Industries Ltd v. ONGC ltd and Others, [ 1998]
H sec 305 this Court was dealing with a case prior to coming into force
r

CENTROTRADE MINERALS AND METAL INC."· HINDUSTAN COPPER LTD [SINHA, J.] 191

of the 1996 Act. This Court in that case noticed the provisions contained A
in Section 4 7 of the 1940 Act and Section 9(b) of the 1961 Act stating:

"17 ... By reason of Section 9(b ), the 1961 Act does not apply to any
award made on an arbitration agreement governed by the law of
India. The 1961 Act, therefore, does not apply to the arbitration
agreement between the appellant and the first respondent. The 1940 B
Act applies to it and, by reason of Section 14(2) thereof, the courts
in India are entitled to receive the award made by the second
respondent. We must add in the interests of completeness that it is
not the case of the appellant that the High Court at Bombay lacked
the territorial jurisdiction to do so." c
In Bhatia International v. Bulk Trading S.A. and Another, [2002] 4
SCC 105 this Court was.considering a pre-award situation, Therein the court
was concerned with the power of the court to issue interim order and in that
context it fell for consideration whether Sections 9 and 17 occurring in Part
I of the 1996 Act would apply to the arbitration proceedings falling under
D
Part II. It was opined :

"26 .... The general provisions will apply to all Chapters or Parts
unless the statute expressly states that they are not to apply or where,
in respect of a matter, there is a separate provision in a separate E
Chapter or Part. Part II deals with enforcement of foreign awards.
Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define
foreign awards, as being awards covered by arbitrations under the
New York Convention and the Geneva Convention respectively.
Part II then contains provisions for enforcement of"foreign awards" F
which necessarily would be different. For that reason special
provisions for enforcement of foreign awards are made in Part II.
To the extent that Part II provides a separate definition of an arbitral
award and separate provisions for enforcement of foreign awards,
the provisions in Part I dealing with these aspects will not apply to
such foreign awards. It must immediately be clarified that the G
arbitration not having taken place in India, all or some of the
provisions of Part !may also get excluded by an express or implied
agreement of parties. But if not so excluded the provisions of Part
I will also apply to "foreign awards". The opening words of
Sections 45 and 54, which are in Part II, read "notwithstanding H
192 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A anything contained in Part I". Such a non obstante clause had to be
put in because the provisions of Part I apply to Part II."

[Emphasis supplied]

Although correctness of the said decision is open to question, we need
B not go into the same as at present advised.

In Furest Day Lawson Ltd. v. Jindal Exports Ltd., [2001] 6 SCC 356,
this Court opined that ''Once the court decides that the foreign award is
enforceable, it can proceed to take furtht:r effective steps for execution of
the same. There arises no question of making foreign award a rult: of court/
c dt:cree again"; but enforceability thereof would depend upon the validity of
the arbitration agreement.

In Sundaram Finance Ltd. v. Nt:,PC India Ltd., [1999) 2 SCC 479], this
Coult held :

D "The 1996 Act is very different from the Arbitration Act, 1940. The
provisions of this Act have, therefore, to be interpreted and
construed independently and in fact reference to the 1940 Act may
actually lead to misconstruction. In other words, the provisions of
the 1996 Act have to be interpreted being uninfluenced by the
E principles underlying the 1940 Act. In order to get help in construing
these provisions, it is more relevant to reft:r to the UNCITRAL
Model Law rather than the 1940 Act. ..

In Sundaram Fmunc:e (supra). this Court categorically held that an
interim order can be pa~sed under the 1996 Act in terms of Section 9 only
F during the arbitral proceedings or before the arbitral proceedings; whereas
under the 1940 Act, the party could have applied for appointing arbitrator
even when no matter was pending before the court.

In Thyssen Stahlunion GMBH v. Steel Authority o.f India Ltd.. [ 1999]
9 sec 334. it was held :
G
"Present-day courts tend to adopt a purposive approach while
interpreting the statute which repeals the old law and for that
purpose to take into account the objects and reasons which led to
the enacting ufthe nev. Act. We have seen above that this approach
H was adopted by this Court in M ,\,/, l. c · Ltd. case. Provisions of both
CENTROTRADE MINERALS AND METAL INC.'· HINDUSTAN COPPER LTD. [SINHA.J.J 193

the Acts, old and new, are very different and it has been so observed A
in Sundaram Finance Ltd. case. In that case, this Court also said
that provisions of the new Act have to be interpreted and construed
independently and that in fact reference to the old Act may actually
lead to misconstruction of the provisions of the new Act. The Court
said that it will be more relevant, while construing the provisions
of the new Act, to refer to the UNCITRAL Model Law rather than B
the old Act. In the case of Kuwait Minister of Public Works v. Sir
Frederick Snow and Partners the award was given before Kuwait
became a party to the New York Convention recognised by an
Order in Council in England. The House of Lords held that though
a foreign award could be enforced in England under the (U.K.) c
Arbitration Act, 1975 as when the proceedings for enforcement of
the award were initiated in England Kuwait had become a party to
the Convention. It negatived the contention that on the date the
award was given Kuwait was not a party to the New York
Convention."
D
At this juncture, we may notice a decision in Adam v. Cape Industries,
(1990) I Ch 433, wherein, although the court was dealing with the
enforcement of foreign judgments, it laid down the principles relevant to
the enforcement of New York Convention awards stating that where it was
alleged that a New York Convention award should not be enforced because E
such enforcement would do substantial injustice and, therefore, was contrary
to public policy in respect whereof the following had, normally, to be
included amongst the relevant considerations :

• the nature of the procedural injustice;
F
• whether the party resisting enforcement had invoked the supervisory
jurisdiction of the seat of the arbitration;

• whether a remedy was available under that jurisdiction;

• whether the courts of that jurisdiction had conclusively determined
G
the complaint in favour of upholding the award;

• if the party resisting enforcement had failed to invoke that remedial
jurisdiction, for what reason and, in particular, whether it was acting
unreasonably in failing to do so. H
194 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A ANA.LYS!S:

lt is not in dispute that the contention of HCL from the beginning was
that the provision contained in the second part of the arbitration is void ab
initio and of no effect. As noticed hereinbefore, it even filed a suit prior
to entering into the reference by the Arbitrator. Even after the award was
B passed, proceedings before appropriate courts had been initiated. In its
written statement filed before the arbitral tribunal, the question as regards
the jurisdiction of the arbitrator was questioned by it. The learned arbitrator
had, relying on or on the basis of the decisions, referred to herein before, and
also an opinion rendered by a former judge of this Court held that such an
arbitration agreement is valid in law. In terms of Section 16 of the 1996
c Act, the arbitrator, keeping in view the fact that the question as ;·egard his
jurisdiction had been raised was bound to decide the same before entering
into the merit of the matter. Only in the event, it came to the conclusion
that the arbitral tribunal had the requisite jurisdiction, it could have proceeded
to determine the merit of the matter. We say so in view of the fact that
D in the event an arbitrator was of the opinion that he had no jurisdiction in
the matter, the arbitration clause being invalid in law, Centrotrade could have
preferred an appeal in terms of sub-section (2) of Section 37 of the 1996 Act.

The question as regard lack of inherent jurisdiction on the part of the
arbitrator in view of the second part of the arbitration clause being opposed
E to the public policy could have been raised by HCL in terms of Section 34
of the 1996 Act.

Even if it is held that two tier arbitration is permissible, under the 1996
Act it might lead to an incongruity. A two tier arbitration is invalid in law
in the context of the 1996 Act having regard to Section 23 of the Contract
F Act as statutory jurisdiction cannot be waived by contract. It is, thus, amply
clear that the very scheme of the 1996 Act does not contemplate a two tier
arbitration agreement of this nature.

Conditions as regard non-existence or invalidity of an arbitration
agreement can, in our opinion, be raised while resisting enforcement of a
G foreign av.ard. Section 4 of the 1996 Act contemplates existence of an
arbitration agreement which would mean a valid arbitration agreement. If
the arbitration agreement is void and of no effect, it is non est in the eye
of Jaw and, thus. cannot be enforced. An arbitrator derives its jurisdiction
from a reference which would mean a dispute and difference to be
adjudicated upon in pursuance of or in furtherance of a valid arbitration
H
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. (SINHA, I.] 195

- agreement. It is not in dispute that the parties agreed that the Indian law
shall apply. The validity or legality of a contract, thus, must be judged on
the touch-stone of Section 23 of the Indian Contract Act. If a contract is
A

opposed to a public policy, the same is void and of no effect.

CONCLUSION :
B
It is doubtful whether the decisions of the Calcutta, Bombay and
Madras High Court could have been held to be valid if a situation of the
present nature had arisen therein, namely, both the 1940 and 1961 Acts are
applicable in relation to two different awards made at two different point of
time. The said decisions, therefore, might have been held to be good only
in terms of the provisions of the 1940 Act or the 1961 Act but the ratio c
thereof cannot be extended to the cases falling under both the parts of the
1996 Act.

To bring clarity in the matter, we may notice the dichotomy arising
herein. If the first award was to be enforced (although no occasion arose
therefor), it could have been done only in terms of Part I of the Act. Despite D
invocation of second part of the arbitration agreement, it would not cease
to be a decree in terms of Section 36 of the Act unless the operation thereof
was directed to be stayed. In other words, the first award of the arbitral
tribunal, on the expiry of the period specified for challenging the award,
became a decree despite invocation of the second part thereof. It is difficult
to comprehend that despite a part of the award becoming a decree of the
E
court, the same would not be binding upon the arbitral tribunal. Section 34
of the 1996 Act provides for setting aside a domestic Indian award. It unlike
the English Arbitration Act does not permit the parties to limit or avoid the
operation of the statutory provisions.
F
Furthermore, the grounds for questioning a domestic award and a
foreign award are different. In the context of the 1996 Act, an arbitration
agreement which would otherwise be contrary to the provisions of the laws
governing the contract between the parties would be void being opposed to
public policy.
G
The High Court's judgment, therefore, in my considered view, cannot
be sustained.

It is, thus, not necessary for us to advert to other questions raised at
the Bar. Although we do not agree with the reasons assigned by the High
Court, but we uphold the conclusion thereof on different grounds. H
196 SUPREME COURT REPORTS [2006) SUPP. 2 S.C.R

A For the reasons aforementioned. Civil Appeal arising out ofSLP (Civil)
No. l 8611 of 2004 filed by Mis Centrotrade Minerals and Metal Inc., is
dismissed and Civil Appeal arising out of SLP (Civil) No.21340 of 2005
-
preferred by Hindustan Copper Ltd. is allowed. In the peculiar facts and
circumstances of the case. the parties shall pay and bear their own costs.

B TARUN CHATTERJEE, J.

I have had an opportunity to go through the judgment delivered/
proposed by my learned brother S.B. Sinha, J. lam unable to agree with the
conclusion as well as the reasons of my learned brother and in that view of
the matter I would prefer to give my own reasons. In my view, the judgment
c and order of the Division Bench and the learned Single Judge of the Calcutt
High Court should be set aside and the matter be sent back to International
Chamber of Commerce arbitrator for fresh disposal of the arbitration
proceedings in London in the manner indicated hereinafter.

]) Leave granted in both the SLPs.

These are two appeals which arise from the judgment or order of a
Division Bench of the Calcutta High Court reversing a judgment or order
of a learned Single Judge of the same High Court whereby and whereunder
the Hindustan Copper Limited (in short HCL ')was directed to make payment
E to Centrotrade Minerals & Metals Inc. (in short "Centrotrade").

Centrotrade is incorporated in United States of America dealing with
sale and purchase of non-precious metals including copper. Whereas HCL
is a Government of India undertaking and its business includes purchase of
wpper concentrate. They entered into an agreement on 16th of January, 1996
F where centrotrade was the seller and the HCL was the purchaser of copper
concentrate. Clause 14 of the agreement provides for arbitration in case any
differences or disputes arise between the parties. Clause 14 of the agreement
reads as under :

G ''14. Arbitration ---

A II disputes and difference whatsoever arising between the parties
out of, or relating to the construction meaning and operation or
effect of the contract or the breach thereof shall be settled by
arbitration in India through the arbitration panel of the Indian
H Council of Arbitration in accordance with the Rules of arbitration
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD (CHATTERJEE. J) J97

- of the Indian Council of Arbitration.

If either party is in disagreement with the arbitration result in
A

India, either party will have the right to appeal to a second arbitrator
in London, U.K. in accordance with the rules of conciliation and
arbitration of the International Chamber of Commerce in effect on
the date hereof and the result of this second arbitration will be B
binding on both the parties. Judgment upon the award may be
entered in any Court of Jurisdiction."

The only other relevant clause of the agreement which is required to
be taken note of is Clause 16 which runs as under :
c
"16. CONSTRUCTION:

The contract is to be constructed and to take effect as a contract
made in accordance with the laws of India."
D
Disputes arose between the parties to the agreement during December
1998 and January 1999 and pursuant to clause 14 of the agreement, disputes
were referred to Indian Council of Arbitration where Centrotrade was the
claimant. The Indian Council of Arbitration appointed an arbitrator before
whom Centrotrade claimed an award for a sum of US$ 383,442.90 (equivalent
to Indian Rupees 1,36,73,573.00 calculated at the exchange rate of Rs. 35.66 E
as prevailing on May I 0, 1997) in respect of the goods shipped on board
the vessels "M.V. MARITIME MASTER" AND "M.V. LOK PRITI'', and
for interest pendent lite at such rate as Centrotrade was entitled to under the
law and also for interest on the sum awarded until decree was pronounced
in terms of the award. The arbitrator appointed by the Indian Council of p
Arbitration, however, made a 'NIL' award dated 15th June, 1999. Disagreeing
with the award passed by the arbitrator appointed by the Indian Council of
Arbitration, and relying on the second part of Clause 14 of the agreement,
Centrotrade approached the International Chamber of Commerce (in short
'ICC') on 22nd February, 2000. The arbitrator appointed by the ICC passed
an award on 29th of September, 200 I in favour of the Centrotrade in the G
following manner :

"a. HCL do pay Centrotrade the sum of $ 152, 112.33, inclusive of
interest to the date of this award in respect of the purchase price
for the first shipment. H
198 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A a. HCL do pay Centratrade the sum$ 15,815.59, inclusive of interest
to the date of this Award in respect of demurrage due on the first
shipment
-
b. HCL do pay centrotrade the sum of $ 284,653.53, inclusive of
interest to the date of this Award in respect of the purchase price
B on the second shipment.

c. HCL do pay centrotrade their legal costs in this arbitration in the
sum of$ 82,733 and in addition the cost of the international court
of Arbitration, the arbitrator's fees and expenses totaling$ 29,000.

C d. HCL do pay Centrotrade compound interest on the above sums
from the date of this Award at 6% p.a. with quarterly rests until
the date of actual payment."

After the award was passed by the ICC arbitrator, an application was
filed by HCL seeking declaration of the award passed by the ICC as void
D and not enforceable. At the same time, Centrotrade filed an application for
enforcement of the ICC Award. These applications were transferred to the
original side of the Calcutta High Court which were heard and disposed of
by the Judgment and order of the learned Single Judge of that Court on I om
March 2005. The learned Single Judge held that the ICC Award was
E enforceable in law and therefore direction was made to HCL to make
payment to Centrotrade. While making this direction. it was inter alia held
by the learned Single Judge as under :

(a) The ICC award was a foreign award under Section 44 of the
Arbitration and Conciliation Act, 1996 (in short 'the Act') as it
F satisfied all the conditions mentioned thereunder, namely,

(i) There was commercial relationship between the parties;

(ii) The award was made in U.K. - a Convention country; and

(iii) The award was made in pursuance of a written agreement between
G
the parties.

(b) the plea ofHCL that it was not given proper opportunity to present
their case before the arbitrator appointed by the ICC was liable
to be rejt:cted. In this connection, the learned Judge observed that
H !KL had full knowledge of the proceedings and proper opportunity
CENTROTRADE MINERALS AND METAL INC. ». HINDUSTAN COPPER LTD. [CHATTERJEE, J] .199

to present their case was duly given to HCL and therefore the plea A
ofHCL that proper opportunity was not given, was rejected. It was
also held that some papers had in fact reached the arbitrator after
the stipulated time and the arbitrator also considered the submissions
of HCL before making the award.

(c) Under the Indian law it was not impermissible to have an appellate B
arbitration forum where the agreement provided for it, following
the judgments in the cases of Heeralal Agarwalla & Co. v. Joakim
Nahapiet & Co., AIR (1927) Calcutta 647; Fazalally Jivaji Raja
v. Khimji Poonji & Co., AIR (1934) Bombay 476 and MA. &
Sons v. Madras Oil and Seeds Exchange Ltd, AIR (1965) Madras
392, and a decision of this Court in Garikapatti Veerava v. N.
c
Subbiah Choudhury, AIR (1957) SC 540.

(d) The award passed by the ICC arbitrator is the relevant 'award'
under the Act.
D
(e) The question of the award of the Indian arbitrator becoming final
and binding on the parties did not arise at all.

(f) In view of Second Part of Clause 14 of the Agreement it was only
the ICC award that was binding on the parties. E

(g) The ICC Award was not contrary to public policy. Accordingly
the claim of the HCL that Indian award was a deemed decree of
the court under Section 36 of the Act and therefore a provision
for appellate forum and an award passed by it, are against public
policy of India insofar as they undermine powers of Indian Courts F
under Sections 34, 35, and 36 of the Act, was rejected.

However, on appeal, a Division Bench of the High Court, in substance,
held as under :

(a) The Second part of clause 14 of the contract allowing a second G
arbitration is valid. Relying on the decisions of Heeralal Agarwalla
& Co. v. Joakim Nahapiet & Co., (supra) Fazalally Jivaji Raja
v. Khimji Poonji & Co., (supra) and MA. & Sons v. Madras Oil
and Seeds Exchange Ltd, (supra}, the Division Bench held
that an appellate arbitration forum or a second arbitration was not H
200 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A impennissible under the Indian Law. Therefore, the award by the
arbitrator appointed by the ICC who is a second arbitrator is
valid.

(b) The ICC award was not a 'foreign award' within the meaning of
Section 44 of the Act, as according to the Division Bench, mere
B fulfillment of conditions of section 11 of the Act did not make
tlie award a 'foreign award'. This conclusion was arrived at by
the Division Bench on the ground that the conditions under
Section 44 are qualified by the expression - 'unless the context
otherwise requires'. According to it, if one context otherwise
c requires. then an award which fulfills the conditions of section 44
becomes a domestic award. According to the Division Bench,
a contract being governed by Indian laws is one such
context. Therefore, the Division Bench concluded that since the
present case where the law governing the contract was Indian law,
the l~C Award though made outside India, was not a "foreign
D award".

(c) On the interpretation of Clause 14 of the arbitration agreement,
the Division bench hdd that the second arbitration in London was
nut in the nature of an appeal against the award of the Indian
Council of Arbitration. Therdon:, the ICC award cannot overrule
E the award passed by the Indian Arbitrator and thus it was not
enforceable due to the operation of the Indian award.

On the above observation and findings made by the Division bench the
judgment of the learned Single Judge was set aside. Aggrieved thereby,
F Centrotrade has filed Special Leave Petition against the aforesaid judgment
of the Division Bench of the Calcutta High Court and at the same time HCL
has also filed another Special Leave Petition against the same judgment. In
both the Special Leave Petitions notices were issued and they were taken up
for final hearing together for decision

G We have heard Mr. Sarkar learned senior counsel appearing for
Centrotrade and Mr. Debabrata Roy Choudhury learned senior counsel for
HCL. I have also examined the entire material on record including the
arbitration agreement. the awards and judgments of the Divisic'l Bench as
well as the learned Single Judge. Before us, the following issues were raised
H by the learned counsel for the parties for decision in the appeals :
CENTROTRADE MINERALS AND METAL INC v. HINDUSTAN COPPER LTD. [CHATTERJEE, J.] 20 J

(I) Whether second part of Clause 14 of the agreement A
providing for a two tier arbitration was valid and permissible in India under
the Act ?

(2) If it is valid, on the interpretation of clause ,14 of the agreement,
can it be said that the ICC Arbitrator sat in appeal against the award of the
Indian Arbitrator ? B
(3) Whether the ICC award is a foreign award or not ?

(4) Whether HCL was given proper opportunity to present its case
before the ICC arbitrator?
c
Issue No. I - Whether second part of Clause 14 of the agreement
providing/or a two tier arbitration was valid permissible in India under the
Act?

So far as this issue is concerned, before I go into it, it would be
appropriate to state that both the Division Bench and the learned Single Judge D
held that a two tier agreement was valid and permissible in India under the
Act.

In my view, a two tier arbitration entered into before or after the coming
into force of the Act is valid and permissible in India. A two tier arbitration
was permissible and valid in India under both, the 1899 Act and the 1940
E
Act, is now well settled. In the case of Hirata! Agarwal/av. Jakin Nahopier
& Co., AIR (1927) Calcutta 647, before coming into force of the present Act,
it was held that the agreement by parties to submit to more than one
arbitration on the same dispute was permissible. Applying the principles laid
down in the same dispute was permissible. Applying the principles laid down F
in Hiralal's case (supra), Bombay High Court in Fazalally Jivaji Raja v.
Khimji Poonji & Co., AIR (1934) Bombay 476, answered the issue saying
that a two tier arbitration is valid and permissible in India. While answering
this question, after considering the provisions of the Indian Arbitration Act,
1899, Bombay High Court observed as follows :
G
"The intention of the parties is to be sole guide for determining
the mode of working out the submission and reaching a final
decision till the law of arbitration is based upon the principles of
withdrawing the disputes from the ordinary Courts and enabling the
parties to substitute a domestic tribunal. Once a Tribunal reaches H
202 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A a final decision, as contemplated or agreed upon by the parties, the
Arbitration Act as it was enforced come to the help to the parties
to enforce the same decision."

This view of the Calcutta High Court and the Bombay High Court was
also accepted by the Madras High Court in the case of M.A. & Sons v.
B Madras Oil & Seeds Exchange Ltd., AIR (1965) Madras 392. I Need not
deal with the issue of validity of two-tier arbitration in respect of disputes
arising before the coming into force of the Act any further.

In my view this position of law has remained the same as I do not find
any prohibition or ban being introduced by the Act from entering into an
c agreement providing for a two-tier arbitration and that at the time of
introduction of the Act, it was well known to the legislature that it was
consistently held and approved by courts of India that two-tier arbitration
was permissible in India.

D However, it was submitted by Mr. Rai Choudhary learned senior
counsel appearing for HCL that use of the word "only" in Section 34 of the
Act would show the legislative intendment that the domestic award cannot
be challenged in any manner except in the manner provided by Section 34
of the Act. This is not the position in the present case in view of second Part
of clause 14 of the agreement. In this case the parties consciously agreed
E to have the domestic award followed by the foreign award. In any view of
the matter, the provisions of Section 34 of the Act are not intended to curtail
the powers of the contracting parties to contract in the manner they desire.

For the reasons aforesaid, I am in agreement with the conclusions of
the learned Single Judge as well as the Division Bench of the Calcutta High
F
Court that a two tier arbitration agreement, even after coming mto force of
the present Act, is valid and permissible in India. Before I switch over to
the other issues, I may point out that a question arose before us that this two
tier agreement under the instant case was opposed to public policy. ....-
G Coming to the issue of the agreement being against the public policy
of India, I wish to differ with the findings of my learned brother S.B. Sinha,
1. I agree that it is well settled that any contractual arrangement negating the
statutory provisions is invalid as being opposed to public policy. My learned
brother has held in his judgment. that the contractual arrangement entered
into by the parties in this case. in particular, second part of clause 14 of the
H
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [CHATTERJEE, J] 203

agreement would in all intent and purport make the provisions of Sections A
34 and 36 of the 1996 Act nugatory. I disagree with this finding of my.
learned brother. After a careful consideration of the 1996 Act, I find nothing
in it prohibiting the parties from entering into an agreement providing for
a two tier arbitration. According to my learned brother, the part of the
agreement providing for two tier arbitration is invalid under the 1996 Act
and that validity of an award can only be questioned before a court under B
Section 34 and before no other forum chosen by the parties. In my view,
however, the award that must be considered by the court, for its enforcement
or on the question of validity is the final award that has been passed
following the procedure agreed upon by the parties.

As already held, the reasoning adopted in the decisions, as noted herein
c
earlier, in the cases of Heeralal Agarwal/a & Co. v. Joakim Nahapiet & Co.,
AIR (1927) Calcutta 647, Fazalally Jivaji Raja v. Khimji Poonji & Co., AIR
(1934) Bombay 476 and MA. Sons v. Madras Oil and Seeds Exchange Ltd.,
AIR (1965) Madras 392, squarely apply to the present Act as well. Just as
there was no express prohibition on the appellate arbitration in 1899 and D
1940 Acts, so there is no express prohibition in the 1996 Act. The relevant
section of 1996 Act is Section 35 which only provides that "subject to this
part of arbitral award shall be final and binding on the parties and persons
claiming under them respectively." Similarly, I find that Condition No. 7 of
the First Schedule of the 1940 Act provided that "the award shall be final
E
and binding on the parties and persons claiming under them respectively".
In MA. & Son's case (supra) the Madras High Court while dealing with this
aspect of the matter made the following observations :

"Naturally, these words have to be construed as subject to any right
of appeal, which might be provided for either by the contract itself, F
or by any by-law governing the parties ... No doubt, except upon
grounds specified in S. 30 of the Act, an award is not liable to be
set aside, and is final between the parties. But, what is the award
that is final between the parties, when the procedure governing the
parties itself makes provision for an initial award on arbitration, and
an appeal which may be instituted by either party aggrieved? ... As
G
observed by the Supreme Court ... the legal pursuit of successive
remedies will make them all proceedings 'connected by an intrinsic
unity' and 'to be regarded as one legal proceeding". In that sense,
it is the award by the appellate Tribunal, if an appeal is preferred
which becomes the final award that governs the parties .... " H
204 SUPREME COURT REPORTS (2006) SUPP. 2 S.C.R.

A The reasoning given by the Madras High Court in the aforesaid decision
in my view equally applies to the 1996 Act, since it is based on the meaning
to be given to the term "'award" in the case of successive arbitration. In view
of the discussion made herein earlier. and considering the above decisions,
I am, therefore. of the view that Section 35 is not a bar to appellate
arbitration In my view this section only comes into operation once the
B arbitration proceedings as a whole which must include appellate arbitrations,
if any, have ended.

In my view allowing the appellate arbitrations is fully in consonance
with the objects of the 1966 Act.
c Before parting with this aspect of the matter. we may take into
consideration the question whether an arbitration clause that leads to both
domestic and foreign awards on the same dispute, i.e. an arbitration clause
providing for two different modes of arbitration. is valid or not under the
Act. In His Lordship's view even if a two tier agreement is valid under the
D 1996 Act, it cannot be such that one award is governed by Part I of the Act
and the award in the second tier governed by Part-II of the 1996 Act, as the
procedure applicable to the arbitration proceedings as well as for enforcement
of the awards is difti::rcnt under different parts. In my view, there is nothing
under the 1996 Act prohibiting the parties from entering into an agreement
wh.:reunder the first arbitration proceeding is conduc,.:d under Part I of the
E 1996 Act and the appeal therefrom is conducted under Part JI of the 1996
Act. In fact. earlier. two separate legislations, i.e. the 1940 and 1961 Act.
dealt with domestic awards and foreign awards respectively However the
legislature keeping in mind the necessity to have similarity in administration
of domestic awards as well as foreign awards. has consolidated the laws
F relating to domestic and foreign awards in the 1996 Act, in effect making
both the types of awards enforceable under the same Act. Keeping this in
mind, and also that parties' autonomy is paramount, I am of the view that
it is not impermissible under the 1996 Act to have one part of the award
governed by Part I and the other part by Part II. Further, an appeal is an
intrinsic part of the original proceeding and it is the final award that comes
G out after an appeal is preferred from the first award. that is relevant for the
purpose of 1996 Act. Thus it follows that nothing in the 1996 Act prohibits
the parties from providing a two tier arbitration wherein one tier is dealt with
under Part I and the other under Part II of the 1996 Act. Such an agreement
does not violate the provisions of Sections 34 and 36 of the 1996 Act and
H it cannot be said to be invalid as being opposed to public policy of India.
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [CHATTERJEE, I.] 205

Therefore, in my view, the second part of clause 14 of the agreement and A
the ~CC arbitration in its furtherance, are not invalid as being opposed to
public po!icy of India.

It is well recognized as my learned brother S.B. Sinha, J. had pointed
out that party autonomy is a paramount consideration of the 1996 Act subject
only to such safeguards as are necessary in the public interest. Therefore, B
so long as an agreement between the parties to enter into an appellate
arbitration does not derogate from the public interest, it is always permitted.
The object of Section 35 of the Act as observed in the I 76th Report of the
Law Commission, is to limit the ambit of court intervention in arbitral awards
and this object is not affected by allowing appellate arbitrations. In this
connection, it may be noted that even in foreign jurisdiction such as U.K.,
c
the appellate arbitrations are permitted. (See Russel on Arbitration 22nd
Edition page 393).

That apart, even two tier arbitrations wherein the original arbitration
proceeding is domestic and thus governed by Part I of 1996 Act, and the D
appellate proceeding is foreign and thus governed by Part II of the Act can
be permitted. The judgment of my learned brother S.B. Sinha, J. that such
proceedings are opposed to the public policy of India because the Act
provides different procedures in respect of domestic and foreign awards
appears to be based on his views that the final award in such a case would
be "an admixture of domestic and foreign award", such that "one part of
E
arbitration agreement shall be enforceable as a domestic award but the other
part would be enforeceable as a foreign award." But we must keep it in mind
that the doctrine of merger equally applies in cases of appellate arbitrations,
such that on the issuance of appellate award, the original award merges with
it and only the appellate award is valid and capable of enforcement. This F
was also the intention of the parties while incorporating Part II of Clause 14
of the agreement, which clearly says that only the award that would be passed
by the ICC arbitrator would be binding on the parties and the judgment upon
that award maybe entered in any court of jurisdiction. Therefore, I am unable
to agree that such two tier arbitration proceedings culminate into an
admixture of two different types of awards, as there is eventually only one
G
award that subsists.

For the reasons aforesaid, I, therefore, conclude that the second Part
of Clause 14 of the agreement is valid and permissible in India under the
~ H
206 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Issue No. 2 : Whether the ICC Arbitrator sat in appeal against the
award of the Indian arbitrator or not?

In my view, to decide Issue No. 2, it is appropriate for us to read clause
14 of the agreement in depth and to find out from the same the intention
of the parties. In order to come to a proper conclusion on this issue, let us
B again reproduce Clause 14 of the arbitration agreement.

"14. Arbitration -

All disputes and differences whatsoever arising between the parties
out of, or relating to the construction meaning and operation or
c effect of the contract or the breach thereof shall be settled by
arbitration in India through the arbitration panel of the Indian
Council of Arbitration in Accordance with the Rules of arbitration
of the Indian Council of Arbitration. If either party is in disagrt:ement
with the arbitration result in India, either party will have the right
D to appeal to a second arbitrator in London, U .K. in accordance with
the rules of conciliation and arbitration of the International Chamber
of Commerce in effect on the date hereof and the result of this
Second arbitration will be binding on both the parties. Judgment
upon the award maybe entered in any Court of Jurisdiction."

E It appears that the first part of the arbitration agreement deals with
arbitration in accordance with the Rules of Arbitration of the Indian Council
of Arbitration. This part of clause 14 of the arbitration agreement does not
say that the results of the arbitration will be binding on both the parties. Nor
it says that the judgment upon the award of the first arbitration may be
F entered in any court of jurisdiction. On the other hand, the second Part of
Clause 14 of the agreement, as quoted above, clearly states that if a party
is in disagreement with the arbitration result in India then the aggrieved party
would have a right to appeal to a second arbitration in London, U.K. The
/
word 'appeal', in my view, in this part of Clause 14 of the agreement has
significance. If the phrase 'in disagreement with the arbitration result in
G India' and the word 'appeal' are read together. we may come to inevitable
conclusion that the ICC arbitrator would act as an appellate arbitrator based
in London, U.K. Moreover, if the second arbitration is not treated as an
appeal, then it would be pointless for a party dissatisfied with a "NIL' Award
in India to refer the matter for a second arbitration in London. U.K. as the
H 'NIL' Award would always prevail over the ICC Award. Accordingly, this
CENTROTRADE MINERALS AND METAL INC. v. HINDUSTAN COPPER LTD. [CHATTERJEE,!.] 207

would defeat the object of the provision in the second part of clause 14 which A
clearly states that 'the results of this second arbitration will be binding on
both the parties'.

That apart it is now well established that original and appellate
proceedings are not distinct legal proceedings, but only constitute stages of
the same legal proceedings, which are connected by an intrinsic unity. B

Further, while passing the ICC Award, the ICC arbitrator in his award
dated 29th of September, 2001, had observed that the award passed by the
Indian Arbitrator was wrong. For clarity of factual situation, I refer to
paragraph 18 of the award of the International Arbitrator and in my view C
the said paragraph needs to be reproduced :

"It is clear therefore that the dry weight, determined in
accordance with clause 6 at the discharge port is the final and
binding basis for payment to be made by HCL to Centrotrade. The
Arbitration Award of 15th June 1999 held otherwise, but, in my D
view, this was obviously wrong. Iq.lthat Award, the arbitrator found
that clause 4, and particularly cla~se 4.4 of the agreement was the
'dominant clause' when that clause specifically dealt with the
quality certificate to be submitted with the shipping documents
which would form the basis for acceptance of the shipping documents E
under the letter of credit. When in the context of the contract as a
whole, it is plain that this part of the terms relating to provisional
payment, made on the basis of load-port quantity and quality
whereas the final amount due was to be determined by certificates
issued at the discharging port in relation to quantity and quality. In
so far as the first stage arbitrator found that there was no express F
promise given by HCL to pay Centrotrade in respect of Centrotrade's
claim, he appears to have ignored the clear terms of the contract.
Nor can there be any question of applying any public policy oflndia
"because copper is a valuable material for the growth of Industrial
development in the developing economy of India", in order to G
influence the decision on this point, whether the claim is framed in
contract or for unjust enrichment."

As seen from the above quoted passage, the ICC arbitrator dealt with
the correctness of the first award and was not acting as a mere second
arbitrator but rather as an appellate forum. H
208 SUPR.EME COURT REPORTS [2006] SUPP. 2 S.C.R.

A I have already held, because of the use of the word 'appeal' in the
second part of the arbitration clause it can be said that the intention of the
parties was that the second arbitration was in the nature of an appeal and
that the second award would take precedence over the first award. It is
therefore amply clear that the intention of the parties to the agreement was
that if the parties are dissatisfied with the first award and if approach was
B made to the ICC arbitrator, in view of second Pait of Clause 14 of the
agreement, then the first arbitration award would not be binding on the
parties nor there would be any existence of the same after the ICC award
was made.

c was anThus, it cannot be said that the proceeding before the ICC arbitrator
independent proceeding nor it could be said that it was merely a
second arbitration in London, U.K. Therefore. I am unable to agree with the
views expressed by the Division Bench of the Calcutta High Court saying
that the ICC arbitration was not in the nature of appeal. Accordingly, the
findings of the Division Bench of the High Court on this issue are set aside.
D
Issue No. 3 : Whether the ICC award is a Foreign Award or not?

The next question is whether the ICC award is a foreign award or not.
The learned Single Judge held that it is a fon:ign award, whereas, the
E Division Bench of the Calcutta High Court held it not to be so and that it
was fact a domestic award. Section 44 of the Act. deals with "foreign award".
To appreciate whether a particular award is a foreign award or not. it would
be appropriate for us to refer to section 44 which reads as under :

"44. Definitior.. - - In this Chapter. unless the context otherwise
F requires, ·'foreign award" means an arbitral award on differences
between persons arising out of legal relationships, whether contractual
or not, considered as commercial under the law in force in India,
made on or after the 11th day of October, 1960 -

(a) in pursuance of an agreement in writing for arbitration to
G which the convention set forth in the First Schedule applies, and

(b) in one of such territones as the Central Government, being
satisfied that reciprocal provisions have been made may, by
notification in the Official Ga:;:ette, declare to be tt:rritont:s to which
H the said Convention applies."
CENTROTRADE MINERALS AND METAL INC. ,.. HINDUSTAN COPPER LTD. [CHATTERJEE, J.] 209

From a bare perusal of section 44 of the Act, it appears that in order A
to come to a conclusion that a particular award is a foreign award, the
following conditions have to be satisfied.

(I) The legal relationship between the parties must be commercial.

(2) The award must be made in pursuance of an agreement in writing. B
(3) The award must be made in a convention country.

In the present case, it cannot be disputed that the aforesaid three
conditions were satisfied, that is to say, there exists a commercial relationship
between the parties, the ICC award was made in pursuance of an agreement C
in writing between the parties and the award was made in a Convention
Country (London, U.K.). In spite of all these conditions having been fully
satisfied, the Division Bench of the Calcutta High Court different with the
views of the learned Single Judge by holding that it was a domestic award.

Section 44 of the Act, as quoted herein above, therefore, makes an D
award foreign, if the above mentioned criteria are fulfilled, 'unless the
context otherwise requires'. The Division Bench, however, laid heavy stress
on this phrase to say that, even though the ICC award fulfils conditions under
section 44 of the Act, it cannot be considered to be a "foreign award".
According to the Division Bench one of the situations to which the phrase E
"unless the context otherwise requires" is applicable, is when the iaw
governing an arbitration agreement is Indian law. Thereby, saying that if the
law governing the "otherwise foreign award" is Indian, the award becomes
a domestic award. While coming to this decision, the Division Bench relied
on the decisions of this Court in Sumitomo Heavy Industries Limited v.
ONGC Ltd, [1998] I SCC 305 and National Thermal Power Corporation f
v. Singer Company, [1992) 3 SCC 551. However, the aforesaid two decisions
of this Court were based on section 9(b) of the repealed Foreign Awards
(Recognition and Enforcement) Act, 1961. Under the repealed Foreign
Awards (Recognition and Enforcement) Act 1961, section 9(b) expressly
provided that its provisions would not be applicable to any award made on G
an arbitration agreement governed by the law of India. However, on repeal
of this 1961 Act, by section 85 of the Act, no corresponding provision to
Section 9(b) of the 1961 Act has been made. In other words, the position
of law under section 9(b) of the Foreign Awards (Recognition and
Enforcement) Act, 1961 was deliberately not incorporated in the present Act.
H
;.

210 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Therefore, under the present Act, an award in pursuance of an arbitration
agreement governed by Indian Law, if the conditions under Section 44 are
satisfied, will not cease to be a foreign award, merely because the arbitration
agreement is governed by the law of India. Accordingly, in my view, the
aforesaid two decisions of this Court on which strong reliance was placed
by the Division Bench of the Calcutta High Court can easily be distinguished.
B The Division Bench of the Calcutta High Court also held that section 48( I )(e)
of the Act is one such provision which attracts the first part of section 44
i.e. the phrase "unless the context otherwise requires". Section 48 (I )(e) reads
as under :

c "48. Conditions for enforcement of foreign awards.- -

(I) Enforcement of a foreign award may be refused, at che request
of the party against whom it is invoked, only if that party
furnishes to the court proof that-

D (2) The award has not yet become binding on the parties, or has
been set aside or suspended by a competent authority of the
country in which, or under the law of which, that award was
made.''

From a bare reading of this Section, it is evident that Section 48 (l)(e)
E deals with the grounds for refusal of the enforcement of a Foreign Award.
Production of proof that such an award has been set aside or suspended by
a competent authority of the country in which, or under the law of which,
that award was made, cannot change a foreign award to a domestic award,
but merely makes it a foreign award which may not be enforced . In Sumitomo
Heavy Industries Limited v. ONGC ltd, [ 1998] I SCC 305 it was however
F
held, in substance, by this Court, where the contract is governed by Indian
law and the seat of the arbitration is elsewhere, wherein arbitrability of the
dispute is established, procedural law of the country of seat of arbitration
governs the conduct of the arbitration proceedings till the award is delivered.
Therefore. the phrase "or under the law of which that award was made" used
G in section 48(1 )( e) refers to the law of the country in which the arbitration
had its seat rather than the country whose law governs the substantive
contract. It is true that the contract and the agreement clause is governed by
the substantial law of India. It is an admittei:I position that the seat of the
second arbitration was in U.K. Therefore, relying on Sumitomo Heavy
/>1dustries v. ONGC Ltd (Supra) the relevant country was U.K. under the
H
CENTROTRADE MINERALS AND MET AL INC. v. HINDUSTAN COPPER LTD. [CHATTERJEE,J.] 211
.. procedural law of which the award was made. Thus, section 48 (I)( e) does A
not by itself contemplate attracting first part of section 44 of the Act.

In this connection, the next question is whether the expression "unless
the context otherwise requires" as used in section 44 of the Act ever comes
into play. This question can be looked into .by the following illustration
where the expression takes relevance. B

Let us consider a contract, including the arbitration agreement, governed
by Indian Law and under it the seat of arbitration is mentioned as U.K.
However, before the commencement of the arbitration proceeding, the
parties agree that though the physical seat of arbitration is in U.K., for all C
purposes the seat of arbitration shall be deemed to be India and the arbitral
proceedings shall be conducted under the curial law oflndia. In this situation,
though all the conditions under section 44 were satisfied the award by the
arbitrator cannot be said to be a foreign award. In such a situation, the
expression "unless the context otherwise requires" in section 44 takes
meaning and becomes applicable and relevant.
D

There is yet another aspect in this matter on the question whether the
award that was passed by the ICC arbitrator was a foreign award of not.
According to the Division Bench, as noted herein earlier, the award passed
by the ICC arbitrator was not a foreign award. Sub-section (2) of Section E
2 of the Act clearly says that Part I of the Act shall apply where the place
of arbitration is in India. Sub-Section (7) of Section 2 of the Act says that
an arbitral award made under Part I shall be considered as a domestic award.
In view of sub-sections (2) and (7) of Section 2 of the Act read with Section
44, in respect of which I have already dealt with, there cannot be any doubt p
that the Division Bench was wrong in its conclusion that the award passed
by the ICC arbitrator was a domestic award. As noted herein earlier, we
should also keep in mind that Section 9(b) of the Foreign Awards (Recognition
and Enforcement) Act, 1961 which provided that it did not apply to an
arbitral award made pursuant to an arbitration agreement governed by law
of India, has been clearly omitted by Section 51 of the 1996 Act. In this G
connection, reference may be made to a decision of this Court in Shreejee
Traco (!) Pvt.. Ltd v. Paperline International Inc., [2003) SCC 79.

In this view of the matter and in view of the discussions made herein
above, I am of the firm opinion that the award of the ICC arbitrator was not H
A
212 SUPREME COURT REPORTS (2006) SUPP. 2 S.C.R.

a domestic award but a foreign award as rightly held by the learned Single
Judge of the High Court.
-
Issue No. 4 : Whether HCL was given proper opportunity to present
its case before the ICC' arbitrator ?

B Under Section 48 ( l) (b) enforcement of a foreign award can be refused
if:

"(b) the party against whom the award is invoked was not given
proper notice of the appointment of the arbitrator or of the arbitral
proceedings or was otherwise unable to present his case."
c
In the case at hand, HCL had the knowledge of appointment of the
arbitrator. In fact, it had approached the Indian courts to stall the ICC arbitral
proceedings. On a Special Leave Petition filed by Centrotrade against the
order of the Rajasthan High Court staying the ICC arbitral proceedings, an
order was passed by this Court by which the stay order of the Rajasthan High
D Court was vacated on 8th February 200 l and direction was given for the ICC
proceedings to continue in accordance with law.

It is true, in his award, Mr. Jeremy Lionel Cooke, the ICC arbitrator
has noted that he was appointed by ICC on 7th June 2000 and that HCL
refused to participate in the arbitral proceedings on the ground that the
E second arbitration clause in the contract was null and void. He directed
Centrotrade and HC'L to file submissions and supporting evidence through
orders dated 20th December 2000, 19th January 200 l and 3rd May 200 I.
However, HCL did not comply with these orders. On 30th July 2001, he sent
a fax to HCL to find out whether they intended to file their defence. He sent
F a further fax on 9th August 2001 informing them that he was proceeding
with the Award Then on l Ith August 2001, the ICC arbitrator received a
reply seeking extension of time. He granted time till 31st August 200 I. He
received another request from HCL's representatives on 27th August 2001
for further extension of time. He granted extension till 12th September 200 I.
He received the first set of submissions filed by HCL, without supporting
G evidence, on 13th September 200 I. He considered those submissions and
took them into account while making the award. He has further recorded in
his award that :

"I made plain in my orders that no further material provided
H thereafter would be taken into account, and I have not dune so".
CENTROTRADE MINERALS AND MET AL INC. '" HINDUSTAN COPPER LTD. [CHATTERJEE,!.] 2 J3

- This last statement indicates that he received further material from HCL,
which he did not consider while making the award. On the face of it, it seems
that HCL was given sufficient opportunity to present its case by the
arbitrator. However, this question must be looked into from the then existing
A

situation.

It must be noted that this Court vacated the stay on the proceedings on
B
8th February 200 I. The first direction of the ICC arbitrator to the parties,
after the order of this Court on 8th February 2001, to serve submissions to
him was made on 3rd May 200 l, i.e. after a time gap of nearly 3 months.
Co-operation of HCL was next requested only on 30th July 2001, i.e. after
a time gap of nearly 2 months. Then the communication on 9th August 200 I C
stated that the arbitrator was proceeding with the award. This time there was
a response from HCL Upon there requests, a time limit of nearly one month
ending on 12th September 2001, was given to HCL The arbitrator received
first set of submissions filed by HCL on 13th September 200 I. Then he made
award 16 days later on 29th September 200 I. It seems that between 13th and D
29th September 2001, he did receive further material from HCL which he
did not consider while making the award on the ground that they were
received after the time limit granted by him to HCL had lapsed.

It is clear from the above lay out of facts that there have been delays
in the arbitral proceedings right from the beginning when Centrotrade E
approached in ICC on 22nd February 2000. Most of the delays were due to
HCL's refusal to participate in the proceedings. However, there were some
delays which cannot be related to HCL's conduct. For instance, the period
from the 8th February 2001 when the order of this Court was made to 3rd
May 2001 when the first direction of the arbitrator was made. The whole F
arbitral proceeding was conducted in a manner indicative of lack of urgency.
Further, I find merit in the submission ofHCL that due to the total dislocation
of air traffic caused by the terrorist attack of 11th September 200 I, the
materials sent by HCL to the ICC arbitrator reached late. Under these
circumstances, a delay of few days in serving their submissions with
supporting evidence, after having accepted to participate in the arbitral G
proceedings, seems excusable and should have been excused. Considering
the overall picture of the circumstances and the delays, refusal of the
arbitrator to consider material received by him after I 3th September 2001
and before 29th September 200 I, seems to be based on a frivolous
technicality. The arbitrator ought to have considered all the material received H
214 SUPREME COURT REPORTS (2006] SUPP. 2 S.C.R.

A by him before he made the award on 29th September 2001. Considering the
decisions in Hariom Maheshwari v. Vinit Kumar Parikh (2005] 1 SCC 379
and Minmetal Germany GmbH v. Ferco Steel Ltd., (1999] l All ER (Comm.)
....
315, it is true that where a party is refused an adjournment and where it is
not prevented from presenting its case, it cannot, normally, claim violation
of natural justice and denial of a fair hearing. However, in the light of the
B delays, some of which were not attributable to HCL's conduct, it was only
fair to excuse HCL' s lapse in filing the relevant material on time. Therefore,
it can be said that HCL did not get a fair hearing and could not effectively
present its case.

c effectively
For the reasons aforesaid, I am of the view that HCL could not
present its case before the ICC arbitrator and therefore enforcement
of the ICC award should be refused in view of section 48 (I )(b) of the Act.
Accordingly, the judgment of the Division Bench and also the judgment of
the learned Single Judge of the Calcutta High Court must be set aside and
the matter be remitted back to the ICC arbitrator for fresh disposal of the
D arbitral proceedings in accordance with law after giving fair and reasonable
opportunity to both the parties to present their cases before him. In view of
the fact that I have set aside the award of the ICC arbitrator on the ground
that HCL was unable to effectively present its case before the ICC arbitrator,
in compliance with Section 48( I)(b) of the Act, I direct the ICC arbitrator
E to pass a fresh award within three months from the date of commencement
of the fresh arbitral proceedings.

Accordingly, both the appeals are disposed of.

There will be no order as to costs.
F
ORDER

In view of difference of opinion, the matter is referred to a larger Bench
for consideration. The Registry of this Court shall place the matter before
the Hon 'ble the Chief Justice for constitution of a larger Bench.
G
v.s. Referred to large bench