Holding

The award is governed by Indian law, including the Arbitration Act, 1940, as the arbitration agreement is subject to the proper law of the contract (Indian law), and Section 9 of the Foreign Awards Act, 1961 excludes it from being a foreign award.

Summary

The National Thermal Power Corporation (NTPC) entered into a contract with Singer Company for equipment supply, stipulating that Indian law would govern the contract and Delhi courts would have exclusive jurisdiction. A dispute was referred to an ICC arbitral tribunal, which chose London as the seat and rendered an interim award. NTPC sought to set aside the award under the Arbitration Act, 1940, but the Delhi High Court held the award was a foreign award under the Foreign Awards Act, 1961 and thus outside its jurisdiction. The Supreme Court held that the arbitration agreement, being part of the main contract, is governed by the proper law of the contract—Indian law—so the award falls within the Arbitration Act, 1940 and Section 9 of the Foreign Awards Act excludes it from being a foreign award. Consequently, Indian courts have jurisdiction to entertain the application, and the High Court's order was set aside.

Issues considered

The law governing the arbitration agreement and the award – Indian law under the Arbitration Act, 1940 or English law under the Foreign Awards Act, 1961.
Whether Section 9 of the Foreign Awards Act, 1961 excludes the award from the Act's ambit.
Whether the place of arbitration (London) determines the substantive law applicable to the arbitration agreement.
Whether Indian courts have jurisdiction to set aside the award under sections 14, 30 and 33 of the Arbitration Act, 1940.

Legislation cited

Arbitration Act, 1940s. 14, s. 30, s. 33
Foreign Awards (Recognition and Enforcement) Act, 1961s. 2, s. 9

Subjects

ArbitrationProper law of contractForeign awardArbitration Act 1940Foreign Awards Act 1961JurisdictionInternational commercial arbitrationICC RulesProcedural lawSubstantive law

Judgment

A NATIONAL THERMAL POWER CORPORATION
v. ~
SINGER COMPANY AND ORS.

MAY 7, 1992

B [T.KOCHU THOMMEN AND S.C. AGRAWAL, JJ.]

Arbitration Act, 1940:

Section 1(2)-Applicability of the AcHnternational Commercial ar-
bitration agreemenHndian company entering into contract with a foreign
\._ -
c company-Arbitration clause contained in the contrac~Stipulation that laws
in force in India applicable and Courts of Delhi would have exclusive
jurisdiction-R.ules of conciliation and arbitration of Intemational Chamber
of Commerce applicable as agreed upon-Dispute refe"ed to Arbitral
Tribunal constituted as per these Rules-Award made in London, the seat of
D arbitration-Whether the award is governed by the Arbitration Act, 1940.

Foreign Awards (Recognition and Enforcement) Act, 1961:

Sections 2 and 9--/nternational commercial arbitration agreement
-Award made in a foreign country-Laws in force in India applicable as
E agreed upon by parties-Such awar~Whether to be regarded as foreign .......
award or domestic award.

Private International Law :
>
International contracts--Law governing the contract-Parties at liberty
F to make choice of the law applicable-Substantive as also procedural-In
absence of choice, presumption that laws of country where arbitration held .....
applicable-However presumption rebuttable having regard to true intention
of parties--Proper law of CQntrac~What is-Doctrine of renvoi-Applicability
of.
G
Words & Phrases :

'Proper Law of Contract'-Meaning of. _......_

The appellant Corporation and Respondent Company entered into
H two agreements on 17.8.1982 at New Delhi for the supply of equipment,
106
N.T.P.C. v. SINGER CO. 107

erection and commissioning of certain works in India. It was agreed that A
the law applicable to the contract would be the laws in force in India and
that the Courts of Delhi would have the exclusive jurisdiction. The agree-
ments contained a specific provision that any dispute arising out of the
contract should be decided as per the relevant clauses of the General
conditions of the contract. According to the General Terms, the Respon-
B
dent being a foreign contractor it would be governed by the provisions
relating to foreign contractors. It further provided for settlement of dis-
putes amicably, failing which by arbitration which would be conducted by
three arbitrators one each to be nominated by the owner and the C~mtrac-
tor and a third to be named by the President of the International Chamber
of Commerce (l.C.C.). c
-- A dispute arose between the parties and it was referred to the
Arbitral Tribunal constituted in terms of rules of arbitration of the ICC
Court,s~Rule~_~nd London was chosen by the ICC Court as the place of
arbitration. The Tribunal made an interim award.
D
The appellant corporation filed an appli~ation under the provisions
of the Arbitration Act, 1940 before the Delhi High Court for setting aside
the said interim award. -

The High Court held that the award was not governed by the Ar· E
bitration Act, 1940; the arbitration agreement on which the award was
made was not governed by the law of India; the award fell within the ambit
of the Foreign Awards (Recognition and Enforcement) Act, 1961; London
being the seat of arbitration, English Courts alone had jurisdiction to set
aside the award; and, that it had no jurisdiction to entertain the applica-
tion filed under the Arbitration Act, 1940. F
.. J. Being aggrieved against the High Court's order, the appellant cor-
poration preferred the present appeal by special leave.

On behalf of the appellant, it was contended that the substantive law G
which governed the arbitration was Indian law and so the competent courts
were Indian Courts. It was also contended that even in respect of proce-
dural matters, the concurrent jurisdiction of the courts .of the place of
arbitration did not exclude the jurisdiction of Indian Courts.

It was contended on behalf of the respondent company that while the H
108 SUPREME COURT REPORTS . [1992] 3 S.C.R.

A main contract was governed by Indian law, as expressly stated by the 1
parties, arbitration being a collateral contract and procedural in nature,
it was not necessarily bound by the proper law of the contract, but the law
applicable to it must be determined with reference to other factors and the
place of arbitration was an im:-ortant factor. It was further contended that
since London was chosen to be the seat of arbitrartion, English law was
B the proper law of arbitration, and all proceedings connected with it would
be governed by that law and exclusively within the jurisdiction of the
English courts; and that the Indian courts had no jurisdiction in matters
connected with the arbitration, except to the extent permitted by the
Foreign Awards Act for recogni~ion and enforcement or. the award.
c
On the question as to which was the law that governed the agreement
on which the award had been made :
\
Allowing the appeal, this Court, \--
D HELD : 1. The High Court was wrong in treating the award in
question as a foreign award. The Foreign Awards Act has no application
to the award by reason of the specific exclusion contained in Section 9 of
that Act. The award is governed by the laws in force in India, including the
Arbitration Act, 1940. [132-C]
E
2. The expression 'proper law of a contract' refers to the legal system
by which the parties to the contract intended their contract to be governed.
If their intention is expressly stated or if it can be clearly inferred from
the contract itself or its surrounding circumstances, such intention deter-
mines the proper law of the contract. The only limitation on this rule is
F that the intention of the parties must ™: expressed bona fide and and it .
should not be opposed to public policy. Where, however, the intention of
the partfos in not expressly stated and no inference about it can be drawn,
their intention as such has no relevance. In that event, the courts en-
deavour to impute an intention by identifying the legal system with which
G the transaction has its closest and most real connection. [118-B, E, F]

Hamlyn & Co. v. Taliskar Distillery, (1891-4) All E.R. 849; Vita Food
Products Inc. v. Unus Shipping Co. Ltd., (1939) AC 27'7 (PC), relied on. --+--

Dicey & Morries: The Conflict of Laws, 11th Edo. Vol. II PP.1161-62,
1-1 referred to.
N.T.P.C. v. SINGER CO. 109

3. Mere selection of a particular place for submission to the jurisdic- A
tion of the courts or for the conduct of arbitration will not, ie the absence of
any other relevant connecting factor with that place, be sufficient to draw an
inference as to the intention of the parties to be governed by the system of law
prevalent in that place. This is specially so in the case of arbitration. This is
particularly true when the place of arbitration is not chosen by the parties
B
themselves, but by the arbitrators or by an outside body, and that too for

_J reasons unconnected with the contract. Choice of place for submission to
jurisdiction of courts or for arbitration may thus prove to have little
relevance for drawing an inference as to the governing law of the contract,
unless supported in that respect by the rest of the contract and the surround-
ing circumstances. Any such clause must necessarily give way to stronger c
indications in regard to the intention of the parties. [119 C-G]

Jacobs Marcus & Co. v. The Credit Lyonn.ais, [1884) 12 Q.B.D. 589
(C.A.); The Fehmam, (1958) 1 All E.R. 333, relied on.

4. Where the parties have not expressly or impliedly selected the D
proper law, the courts impute an intention by applying the objective test to
determine what the parties would have as just and reasonable persons
.intended as regards the applicable law had they applied their minds to the
question. The Judge has to determine the proper law for the parties in such
circumstances by putting himself in the place of a "reasonable man". For this E
purpose the place where the contract was made, the form and object of the
contract, the place of performance, the place of residence or business of the
parties, reference to the courts having jurisdiction and such other links are
examined by the courts to determine the system of law with which the
transaction has its closest and most real connection. The expression 'proper
law' refers to the substantive principles of the domestic law of the chosen F
system and not to its conflict oflaws or rules. [120 A-C; 121 A-BJ

The Assunzione, (1954) P.150, (C.A.); Mount Albert Borough Council
v.Australasian Temperance (lnd General Mutual Life Assurance Society Ltd.,
(1938) A.C. 224, (P.C.), relied on. G
Dicey & Morris: The Conflict of Laws, 11th Edn., Vol. I pp.534-535;
Vol. II p.1164, referred to.

5. Where, there is no express choice of the law governing the contract
as a whole, or the arbitration agreement as such, a presumption may arise H
110 SUPREME COURT REPORTS [1992] 3 S.C.R.

A that the law of the country where the arbitration is agreed to be held is the
proper law of the arbitration agreement. But that is only a rebuttable ~·
presumpton. [121 G-H]

Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners
Ltd., 1970 AC 583, referred to.
B
Dicey & Morris: The Conflict of Laws, 11th Edn. Vol.I p.539, referred
to.

6. The validity, effect and interpretation of the arbitration agreement
are governed by its proper law. Such law will decide whether the arbitra-
c tion clause is wide enough to cover the dispute between the parties. Such
law will also ordinarily decide whether the arbitration clause binds the
parties even when one of them alleges that the contract is void, or voidable
or illegal or that such contract has been discharged by breach or frustra-
. tion. [122-B]
D
Heyman & Anr. v. Darwins Ltd., 1942 (1) All E.R. 337, referred to.

7. The parties have the freedom to choose the law governing an
international commercial arbitration agreement. They may choose the
substantive law governing the arbitration agreement as well as the proce-
E dural law governing the conduct of the arbitration. Where the proper law
of the contract is expressly chosen by the parties, as in the present case,
such law must, in the absence of an unmistakable intention to the contrary,
govern the arbitration agreement. [122 D-E]

F 8. The proper law of the contract in the present case being expressly
stipulated to be the laws in force in India and the exclusive jurisdiction of the
courts in Delhi in all matters arising under the contract having been
specifically accepted, and the parties not having chosen expressly or by
implication a law different from the Indian law in regard to the agreement
contained in the arbitration clause, the proper law governing the arbitration
G agreement is indeed the law in force in India, and the competent courts of this
country must necessarily have jurisdiction over all matters concerning
arbitration. Neither the rules of procedure for the conduct of arbitration
contractually chosen by the parties viz., the l.C.C. Rules nor the mandatory ..J-._
requirements of the procedure followed in the courts of the country in which
H the arbitration is held can in any manner supersede the overridingjurisdic-
N.T.P.C. v. SINGER CO. 111

tion and control o(the Indian law and the Indian courts. [123 F-H; 124-A] A
Bank Mel/at v.Helliniki Techniki SA, (1983) 3 All E.R. 428, referred to.

International Chamber of Commerce Arbitration, 2nd Ed. (1990); Com-
mercial Arbitration, 2nd Ed.; Allen Redfern and Martin Hunter, Law &
Practice of International Commercial Arbitration, 1986; Russel on Arbitration B
20th Ed. (1982); Cheshire & North's Pdvate International Law, 11th Ed.
(1987), referred to.

9. The procedural powers and duties of the arbitrators, are matters
regulated in accordance with the rules chosen by the parties to the extent that
those rules are applicable and sufficient and are not repugnant to the C
requirements of the procedural law and practice of the seat of arbitration.
The concept of party 1mtonomy in international contracts is respected by all
systems of law so far as it is not incompatible with the proper law of the
contract or the mandatory procedural rules of the place where the arbitra-
tion is agreed to be conducted or any overriding public policy. (124 B-D] D
10. An award rendered in the territory of a foreign State may be
regarded as a domestic award in India where it is sought to be enforced by
reason of Indian law being the proper law governing the arbitration agree-
ment in terms of which the award was made. The Foreign Awards Act,
incorporating the New York Convention, leaves no room for doubt on the E
point. [125-E]

- ICC Rules ofArbitration, 1988; Craig, Park and Pauls son : International
Chamber of Commerce Arbitrartion, 2nd Ed. (1990), referred to.

11. The difference between an ad hoc arbitration and an institutional F
arbitration, is rwt a difference between one system of law and another; for
whichever is the proper law which governs either proceeding, it is merely a
ditTernce in the method of appointment and conduct of arbitration. Either
method is applicable to an international arbitration, but neither is deter-
minative of the character of the resultant award, namely, whether or not it is G
a Foreign Award as defined under the Foreign Awards Act, 1961.
[125-H; 126 A-8]

12. An arbitration agreement may be regarded as a collateral or
ancillary contract in the sense that it survives to determine the claims of the
parties and the mode of settlement of their disputes even after the breach or H
112 SUPREME COURT REPORTS (1992] 3 S.C.R.

A repudiation of the main contract. But it is not an independent contract, and
it has no meaningful existence except in relation to the rights and liabilities
of the parties under the main contract. It is a procedural machinery which is
activated when disputes arise between parties regarding their rights and
liabilities. The law governing such rights and liabilities is the proper law of
the contract, and unless otherwise provided, such law governs the whole
B contract including the arbitration agreement, and particularly so when the
latter is contained not in a separate agreement, but, as in the present case, in
one of the clauses of the main contract. (129 A-CJ

Heyman & Anr. v. Darwins Ltd., 1942 (1) All E.R. 337, Bremer Vulkan
C Schiffbau Und Maschinenfabrik v. South India Shipping Corpn., 1981 (1) All
E.R. 289, relied en.

Mustil & Boyd: Commercial Arbitration, 2nd Ed. (1989), referred to.

13. In a proceeding such as the present which is intended to be
D controlled by a set of contractual rules which are self-sufficient and
designed to cover every step of the proceeding, the need to have recourse
to the municipal system of law and the courts of the place of arbitration
is reduced to the minimum and the courts of that place are unlikely to
interfere with the arbitral proceedings except in cases which shock the
judicial conscience. (130 C-E] -
E
Bank Me/lat v.Helliniki Techniki SA, (1983) 3 All E.R. 428, referred to.

14. If the parties had agreed that the proper law of the contract
should be the law in force in India, but had also provided for arbitration
F in a foreign country, the laws of India would undoubtedly govern the
validity, interpretation and effect of all clauses including the ·arbitration
clause in the contract as well as the scope of the arbitrators' jurisdiction.
It is Indian law which governs the contract, including the arbitration
clause, although in certain respects regarding the conduct of the arbitra-
tion proceedings the foreign procedural law and the competent courts of
G that country may have a certain measure of control. (130 F-G]

International Tank and Pipe SAK v. Ku.wait Aviation Fueling Co. KSC,
(1975) 1 All E.R. 242, relied on.

15. The choice of the place of arbitration was, as far as the parties
H are concerned, merely accidental in so for as they had not expressed any
N.T.P.C. v. SINGER CO. [TIIOMMEN, J.) 113

intention in regard to it and the choice was made by the ICC Court for A
J_ reasons totally unconnected with either party to the contract. On the other
hand, apart from the expressly stated intention of the parties, the contract
itself, including the arbitration agreement contained in one of its clauses,
is redolent of India and matters Indian. The disputes between the parties
under the contract ha".e no connection with anything English, and they
have the closest connection with Indian laws, rules and regulations. Any
B
attempt to exclude the jurisdiction of the competent courts and the laws
in force in India is totally inconsistent with the agreement between the
parties. (131 A, B, C]

16. All substantive rights arising under the agreement including that c
which is contained in the arbitration clause are governed by the laws of
India. In respect of the actual conduct of arbitration, the procedural law
of England may be applicable to the extent that the ICC Rules are insuf-
ficient or repugnant to public policy or other mandatory provisions of the
~~
laws in force in England. Nevertheless, the jurisdiction exercisable by the
English courts and tbe applicability of the laws of that country in proce- D
dural matters must be viewed as concurrent and consistent with the
jurisdiction of the competent Indian courts and the operation of Indian
laws in all matters concerning arbitration in so for as the main contract
as well as that which is contained in the arbitration clause are governed
by the laws of India. (131 -H; 132 -A,B] E
~
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1978 of
1992.

- From the Judgment and Order dated 12.2.1991 of the Delhi High
Court in FAO (OS) No. 102 of 1990. F
Shanti Bhushan,. Dr. A.M. Singhvi, C. Mukhopadhaya, J.C. Seth, O.P.
Mittal, Sudarsh Menon and G.G. Malhotra for the Appellant.

S.K. Dholakia, O.P.Sharma, D.C.Singhania, Ms. Nanita Sharma, Hari
Menon, P. Piwany and R.K. Gupta for the Respondents. G
The Judgment of the Court was delivered by

THOMMEN, J. Leave granted.

The National Thermal Power Corporation (the 'NTPC') appeals H
114 SUPREME COURT REPORTS [1992) 3 S.C.R.

A from the judgment of the Delhi High Court in FAO (OS) No.102/90
dismissing the NTPC's application filed under sections 14, 30 and 33 of the
Arbitration Act, 1940 (No. X of 1940) to set aside an interim award made
at London by a tribunal constituted by the International Court of Arbitra-
tion of the International Chamber of Commerce (the "ICC Court") in terms
of the contract made at New Delhi between the NTPC and the respondent
B . the Singer Company (the 'Singer') for the supply of equipment, erection
and commissioning of certain works in India. The High Court held that the
award was not governed by the Arbitration Act, 1940; the arbitration
agreement on which the award was made was not governed by the law of
India; the award fell within the ambit of the Foreign Awards (Recognition
c and Enforcement) Act, 1961 (Act 45 of 1961) (the 'Foreign Awards Act');
London being the seat of arbitration, English Courts alone had jurisdiction
to set aside the award; and, the Delhi High Court had no jurisdiction to
entertain the application filed under the Arbitration Act, 1940.

The NTPC and the Singer entered into two formal agreements dated
D 17:8.1982 at New Delhi. The General Terms and Conditions of Contract
dated 14.2.81 (the 'General Terms') are expressly incorporated in the
agreements and they state :

· "the laws applicable to this Contract shall be the laws in force
E in India. The Courts of Delhi shall have exclusive jurisdition in
all matters arising under this Contract." (7.2).

The General Terms deal with the special responsibilities of foreign
contractors and Indian contractors. The Singer, being a foreign contractor,
is governed by the provisions relating to the foreign contractors. The
F General Terms further provide for settlement of disputes by amicable
settlement, failing which by arbitration.

Sub-clause 6 of clause 27 of the General Terms deals with arbitration
in relation to an Indian contractor and sub-clause 7 of the said clause deals
G with arbitration in respect of a foreign contractor. The latter provision says:

"27.7. In the event of foreign Contractor, the arbitration shall
be conducted by three arbitrators, one each to be nominated
by the Owner and the Contractor and the third to be named
by the President of the International Chamber of Commerce,
H Paris. Save as above all Rules of Concilliation and Arbitration
N.T.P.C. v. SINGER CO. [TIIOMMEN, J.] 115

of the International Chamber of Commerce shall apply to such A

* arbitrations. The arbitration shall be conducted at such places
as the arbitrators may determine."

In respect of an Indian Contractor, sub-clause 6.2 of clause 27 says
that the arbitration shall be conducted at New Delhi in accordance with
the provisions of the Arbitration Act, 1940. It reads : B

"27.6.2. The arbitration shall be conducted in accordance with
·: the provisions of the Indian Arbitration Act, 1940 or any
statutory modification thereof. The venue of arbitration shall
be New Delhi, India."
c
The General Terms further provide :

"the Contract shall in all respects be construed and governed
according to Indian laws." (32.3).
;>!.

The formal agreements which the parties executed on 17.8.82 contain D
a specific provision for settlement of disputes. Article 4.1 provides :

"4.1. Settlement of Disputes : It is specifically agreed by and
between the parties that all the differences or disputes arising
out of the contract or touching the subject matter of the E
~- contract, shall be decided by process of settlement and arbitra-
tion as specified in clause 26.0 and 27.0 excluding 27.6.1 and
27.6.2., of the General Conditions of the Contract."

Being a foreign contractor, the provisions of sub-clause 6 of clause
27 of the General Terms are not applicable to the Singer, but the other F
provisions of clause 27 govern the present contract. Accordingly, the
_A
dispute which arose between the parties was referred to an Arbitral
Tribunal constituted in terms of the rules of arbitration of the ICC Court
(the 'ICC Rules'). In accordance with Article 12 of those Rules, the ICC
Court chose London to be the place of arbitration.
G
It is significant that the parties have expressly stated that the law
__,....,_ which governs the": contract, i.e., the proper law of the contract is the law
in force in India and the courts of Delhi have exclusive jurisdiction in all
matters arising under the contract. One of the clauses of the Contract deals
.., with arbitration (Clause 27 of the General Terms). H
116 SUPREME COURT REPORTS (1992] 3 S.C.R.

A The point for consideration is whether the High Court was right in
rejecting the appellant's application filed under the provisions of the
Arbitration Act, 1940 and in holding that the award which was made in
London on an arbitration agreement was not governed by the law of India
and that it was a foreign award within the meaning of the Foreign Awards
Act and beyond the jurisdiction of the Indian Courts except for the purpose
B of recognition and enforcement under the latter Act.

The award was made in London as an interim award in an arbitration
between the NTPC and a foreign contractor on a contract governed by
the law of India and made in 1ndia for its performance solely in India. The
c fundamental question is whether the arbitration agreement contained in
the contract is governed by the law of India so as to save it from the ambit
of the Foreign Awards Act and attract the provisions of the Arbitration
Act, 1940. Which is the law which governs the agreement on which the
award has been made ?
D
Mr. Shanti Bhushan, appearing for the NTPC, sumbits that admit-
tedly the proper law of the contract is the law in force in India. The ·
arbitration agreement is contained in a clause of that contract. in the
absence of any stipulation to the contrary, the contract has to be seen as a
whole and the parties must be deemed to have intended that the substan-
E tive l~w applicable to the arbitration agreement is exclusively the Jaw which
governs the main contract, although, in respect of procedural matters, the
competent courts in England will also be, concurrently with the Indian
courts, entitled to exercise jurisdiction over the conduct of arbitration. But
occasions for interferance by the courts in England would indeed be rare
F and probably unnecessary in view of the elaborate provisions contained in
the ICC Rules by which the parties have agreed to abide. The substantive
law governing arbitration, which concerns questions like capacity, validity,
effect and interpretation of the contract etc., is Indian law and the com-
petent courts in such matters are the Indian courts. Even in respect of
procedural matters, the concurrent jurisdiction of the courts of the place
G of arbitration does not exclude the jurisdiction of the Indian· courts.

Mr. S.K. Dholakia appearing for .the Singer, on the other hand,
submits that the arbitration agreement is a separate and distinct contract,
and collateral to the main contract. Although the main contract is governed
H by the laws in force in India, as stated in the General Terms, there is no
N.T.P.C. v. SINGER CO. [THOMMEN, J.] 117

express statement as regards the law governing the arbitration agreement. A
In the circumstances, the law governing the arbitration agreement is not
the same law which governs the contract, but it is the law which is in force
in the country in which the arbitration is being conducted. Counsel accord-
ingly submits that the Delhi High Court is right in saying that the saving
clause in section 9 of the Foreign Awards Act has no application to the B
award in question made
\ .
in London by an Arbitral Tribunal constituted in
accordance with the ICC Rules. Counsel submits that the High Court has
rightly held that the impugned award falls under .the Foreign Awards Act
and it is not liable to be challenged on the alleged grounds falling under
sections 14, 30 and 33 of the Arbitration Act, 1940.
c
Counsel says that the award, having been made in London in terms
of the ICC Rules to which the parties have submitted, is governed by the
provisions of the New York Convention, as incorporated in the Foreign
Awards Act, and its enforceability· in India can be resisted only in the
- -- circumstances postulated under that Act, and the Delhi High Court has
rightly rejected the petition invoking the jurisdiction of that court in terms D
of t.he Arbitration Act, 1940.

Mr. Dholakia does not dispute that the substantive rights of the
parties under the Contract are governed by the law of India. His conten-
tion, however, is that while the main contract is governed by Indian law, as E
expressly stated by the parties, arbitration being a collateral contract and
procedural in nature, it is not necessarily bound by the proper law of the
contract, but the law applicable to it must be determined with reference to
other factors. The place of arbitration is an important factor. London
having been chosen in accordance with the ICC Rules to be the seat of
arbitration, English law is the proper law of arbitration, and all proceedings F
connected ~th it are governed by that law and exclusively within the
jurisdiction of the English courts. He denies that the Indian courts have
any jurisdiction in matters connected with the arbitration, except to the
extent permitted by the Foreign Awards Act for recognition and enforce-
ment of the award. G

Dicey & Morris in The conflict of Laws, 11th edn., Vol. II ('Dicey')
- ~...J.. refer to the 'proper law of a contract' thus :

"Rule 180 - The term 'proper law of a contract' means the
system of law by which the parties intended the contract to be H
/
.
118 SUPREME COURT REPORTS [1992) 3 S.C.R.

A governed, or, where their intention is neither expressed nor to
be inferred from the circumstances, the system of law with
which the transaction has its closest and most real connection."
(pages 1161-62)

The expression 'proper law of a contract' refers to the legal system
B by which the parties to the contract intended their contract to be governed.
If their intention in expressly stated or if it can be clearly inferred from the
contract itself or its- surrounding circumstances, such intention determines
the proper law of the contract. In the words of Lord Herchell, L.C. :

"....... .In this case, as in all such cases, the whole of the contract
c must be looked at, and the contract must be regulated by the
intention of the parties as appearing from the contract. It is
perfectly competent to those who, under such circumstances as
I have indicated, are entering into a contract, to indicate by the
terms which they employ which system of law they intend to be
D applied to the construction of the contract, and to the deter-
mination of the rights arising out of the contract".

Hamlyn & Co. v. Ta/isker Distillery, (1891-4) All E.R. 849 at
852.

E Where, however, the intention of the parties is not expressly stated
and no inference about it can be drawn, their intention as such bas no
relevance. In that event, the courts endeavour to 'impute an intention by
identifying the legal system with which the transaction has its closest and
most real connection.
F
The expressed intention of the parties is generally decisive in deter-
mining the proper law of the contract.* The only limitation on this rule is
that tlie intention of the parties must '.f>e expressed bona fide and it should
not be opposed to public policy. In the words of Lord Wright :-

G "......where there is an express statement by the parties of their
intention to select the law of the contract, it is difficult to see

Rule 180 is further elucidated by Dicey in the sub-rules. Sub-rule (1) i:eads :-
"Sub-rule (1) - When the intention of the parties to a contract, as to the law governing
the contract, is expressed in "W"Ords, this expressed intention, in general, determines the
H proper law of the contract.•
..
N.T.P.C. v. SINGER CO. [THOMMEN, J.] 119

-1-- what qualifications are possible, provided the intention ex- A
pressed is bona fide and legal, and provided there is no reason
for avoiding the choice on the ground of public policy ........ "

Vita Food Products Inc. v. Unus Shipping Co. Ltd., (1939) AC
277, 290 (PC). B

In the absence of an express statement about the governing law, the
inferred intention of the parties determines that law.* The true intention
of the parties, in the absence of an express selection, has to be discovered
by applying "sound ideas of business, convenience and sense to the lan- c
guage of the contract ifself'. Jacobs Marcus & Co., v. The Credit Lyonnais,
(1884) 12 Q.B.D. 589, 601 (C.A.). In such a case, selection of courts of a
particular country as having jurisdiction in matters arising under the con-
tract. is usually, but not invariably, be an indication of the intention of the
parties that the system of law followed by those courts is the proper law D
by which they intend their contract to be governed. However, the mere
selection of a particular place for submission to the jurisdiction of the
courts or for the conduct of arbitration will not, in the absence of any other
relevant connecting factor with that place, be sufficient lo draw an in-
ference as to the intention of the parties to be governed by the system of
law prevalent in that place. This is specially so in the case of arbitration, E
for the selection of the place of arbitration may have little significance
where it is chosen, as is often the case, without regard to any relevant or
significant link with the place. This is particularly true when the place of
arbitration is not chosen by the parties themselves, but by the arbitrators
or by an outside body, and that too for reasons unconnected with the
contract. Choice of place for submission to jurisdiction of courts or for
F
arbitration may thus prove to have little relevance for drawing an inference
as to the governing iaw of the contract, unless supported in that respect by
the rest of the contract and. the surrounding circumstances. Any such
clause must necessarily give way to stronger indications in regard to the

-
intention of the parties. See The Fehmam, (1958) 1 All E.R. 333. G

Dicey's sub-rule (2) of rule 180 reads :-
"Sub-rule (2). - When the intention of the parties to a contract with regard to the law
governing the contract is not expressed in words, their intention is to be inferred from
the terms and nature of the contract. and from the general circumstances of the case.
and such inferred intention determines the proper law of the contract." H
•
120 SUPREME COURT REPORTS (1992) 3 S.C.R.

A Where the parties have not expressly or impliedly selected the proper
law,. the courts impute an intention by applying the objective test to
determine what the parties would have as just and reasonable persons
intended as regards the applicable law had they applied their minds to the
question.• The judge has to determine the proper law for the parties in
such circumstances by putting himself in the place of a "reasonable man".
B He has to determine the intention of the parties by asking himself "how a
just and reasonable person would have regarded the problem", The Assun-
zione (1954) P. 150, 176 (C.A.); Mount Albert Borough Council v.
Australasian Temperance and General Mutual Life Assurance Society Ltd.
(1938) A.C. 224, 240 (P.C.)
c
For this purpose the place where the contract was made, the form
and object of the contract, the place of performance, the place of residence
or business of the parties, reference to the courts having j~risdiction and
such other links are examined by the courts to determine the system of law -~
D with which the transaction has its closest and most real connection.

The position in these respects is summarised by the Privy Council in
Mount Albert Borough Council v. Australasian Temperance and General
Mutual Life Assurance Society, Limited, (1938) A.C. 224 at 240 :-
E
"The proper law of the contract means that law which the
English or other Court is to apply in determining the obligations
under the contract .......It may be that the parties have in terms
in their agreement expressed what law they intend to govern,
and in that case prim a f acie their intention will be effectuated
F
by the Court. But in most cases they do not do so. The parties
may not have thought of the matter at all. Then the Court has
to impute an intention, or to determine for the parties what is
the proper law which, as just and reasonable persons, they
ought or would have intended if they had thought about the
G question when they made the contract....".

Dicey's sub-rule (3) of rule 180 reads :-
. "Sub-rule (3). - When ·the intention of the parties to a contract with regard to the law
governing it is not expressed and cannot be inferred from the circumstances. the
contract is governed by the system of law with which the transaction has its closest and
H most real connection."
N.T.P.C. v. SINGER CO. [THOMMEN, J.] 121

Proper law is thus the law which the parties have expressly or A
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 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.
B
II, p. 1164.

In a case such as the present, there is no need to draw any inference
about the intention of the parties or to impute any intention to them, for
they have clearly and categorically stipulated that their contract, made in
India to be performed in India, is to be governed by the 'laws in force in C

- India' and the courts in Delhi are to 'have exclusive jurisdiction in all
matters arising under this contract' (cl. 7). The cardinal test suggested by
Dicey in rule 180 is thus fully satisfied.

As regards the governing law of arbitration, Dicey says :
D
"Rule 58. - (1) The validity, effect and interpretation of an
arbitration agreement are governed by its proper law.

(2) The law governing arbitration proceedings is the law chosen
by the parties, or, in the absence of agreement, the law of the E
country in which the arbitration is held." (Vol. I, Pages 534-
535).'

The principle in rule 58, as formulated by Dicey, has two aspects
(a) the law governing the arbitration agreement, namely, its proper law;
and (b) the law governing the conduct of the arbitration, namely, its F
procedural law.

The proper law of the arbitration agreement is normally the same as
the proper law of the contract. It is only in exceptional cases that it is not
so even where the proper law of the contract is expressly chosen by the
parties. Where, ·however, there is no express choice of the law governing G
the contract as a whole, or the arbitration agreement as such, ·a presump-
tion may arise that the law of the country where the a~bitration is agreed
to be held is the proper law of the arbitration agreement. But that is only
a rebutable presumption. See Dicey, Vol I, p. 539; see the observation in
Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd., H
122 SUPREME COURT REPORTS [1992] 3 s.t.R.

A 1970 AC 583, 607, 612 and 616).

The validity, effect and interpretation of the arbitration agreement
are governed by its proper law. Such law will decide whether the arbitration
clause is wide enough to cover the dispute between the parties. Such law
will also ordinarily decide whether the arbitration clause binds the parties
B even when one of them alleges that the contract is void, or voidable or
· illegal or that such contract has been discharged by breach or frustration.
See Heyman & Anr. v. Darwins, Ltd., 1942 (1) All E.R. 337. The proper
law of arbitration will also decide whether the arbitration clause would ,,;._ -
equally apply to a different contract between the same partieS' or between
c one of those parties and a third party.

The parties have the freedom to. choose the law governing an inter-
national commercial arbitration agreement. They may choose the substan-
-
tive law governing the arbitration agreement as well as the procedural law -~
governing the conduct of the arbitration. Such choice is exercised either
D
expressly or by implication. Where there is no express choice of the law
,. governing the contract as a whole, or the arbitration agreement in par- , ,
ticular, there is, in the absence of any contrary indication a presumption
that the parties have intended that the proper law of the contract as well
as the law.governing the arbitration agreement are the same as the law of
E the country in which the arbitration is agreed to be held. On the other ~

hand, where the proper law of the contract is expressly chosen by the
parties, as in the present case, such law must, in the absence of an
unmistakable intention to the contrary, govern the arbitration agreement
which, though collateral or ancillary to the main contract, is nevertheless a
F part of such contract. ......

;....._
Whereas, as stated above, the proper law of arbitration (i.e., the
substantive law governing arbitration) determines the validity, effect and
interpretation of the arbitration agreement, the arbitration proceedings are
conducted, in the absence of any agreement to the contrary, in accordance
G with the law of the country in which the arbitration is held. On the other
hand, if the parties have specifically chosen the law governing the conduct
and procedure of arbitration, the arbitration proceedings will be conducted
in accordance with that law so long as it is not contrary to the public policy ---
or the mandatory requirements of the law of the country in which the
H arbitration is held. If no such choice has been made by the parties,
N.T.P.C., v. SINGER CO. [TIIOMMEN, J.] 123

+- expressly or by necessary implication, the procedural aspect of the conduct A
of arbitration (as distinguished from the substantive agreement to ar-
bitrate) will be determined by the law of the place or seat of arbitration.
Where, however, the parties have, as in the instant case, stipulated that the
arbitration between them will be conducted in accordance with the ICC
Rules, those rules, being in many respects self-contained or self-regulating
and constituting a· contractual code of procedure, will govern the conduct
B
of the arbitration, except insofar as they conflict with the mandatory
requirements of the proper law of arbitration, or of the procedural law of
'"" the seat of arbitration. See the observation of Kerr, U. in Bank Me/lat v.
Helliniki Techniki SA., (1983) 3 All E.R. 428. See also Craig, Park and
c
- Paulsson, International Chamber of Commerce Arbitration, 2nd· ed. (1990).
To such an extent the appropriate courts of the seat of arbitration, which
in the present case are the competent English courts, will have jurisdiction
in respect of procedural matters concerning the conduct of arbitration. But
the overriding principle is that the courts of the country whose substantive
I.aws govern the arbitration agreement are the competent courts in respect
D
of all matters arising under the arbitration agreement, and the jurisdiction
excercised by the courts of the seat of arbitration is merely concurrent and
not exclusive and strictly limited to matters of procedure. All other matters
in respect of the arbitration agre~ment fall within the exclusive competence
of the courts of the country whose laws govern the arbitration agreement.
~ See Mustil & Boyd, Commercial Arbitration, 2nd ed.; Allen Redfern and E
Martin Hunter, Law & Practice of International Commercial Arbitration,
1986; Russel on Arbitration, Twentieth ed., 1982; Cheshire & North's
Private International Law, eleventh ed. (1987).

The proper law of the contract in the present case being expressly F
stipulated to be the laws in force in India and the exclusive jurisdiction of
~-
the courts in Delhi in all matters arising under the contract having been
specifically accepted, and the parties not having chosen expressly or by
implication a law different from the Indian law in regard to the agreement
contained in the arbitration clause, the proper law governing the arbitration
agreement is indeed the law in force in India, and the competent courts of G
this country must necessarily have jurisdiction over all matters concerning
_J arbitration. Neither the rules of procedure fo~ the conduct of arbitration
contractually chosen by the parties (the ICC Rules) nor the mandatory
requirements of the procedure followed in the courts of the country in

- which the arbitration is held can in any manner supersede the overriding H
124 SUPREME COURT REPORTS (1992] 3 S.C.R.

A jurisdiction and contcol of the Indian law and the Indian courts.
'::t-
This means, questions such as the jurisdiction of the arbitrator to
decide a particular issue or the continuance of an arbitration or the .
frustration of the arbitration agreement, its validity, effect and interpreta-
tion are determined exclusively by the proper law of the arbitration agree-
B ment, which, in the present case, is Indian Law. The procedural powers
and duties of the arbitrators, as for example, whether they must hear oral
evidence, whether the evidence of one party should be recorded necessarily
in the presence of the other party, whether there is a right of cross-ex-
amination of witnesses, the special requirements of notice, the remedies
c available to a party in respect of security for costs or for discovery etc. are
matters regulated in accordailce with the rules chosen by the parties to the
extent that those rules are applicable and sufficient and are not repugnant
to the requirements of the procedural law and practice of the seat of
·-
· arbitration. The concept of party autonomy in international contracts is
re~pected by all systems of law· so far as it is not incompatible with the ~
D proper law of the contract or the mandatory procedural rules of the place
where the arbitration is agreed to be conducted or any overriding public
policy.

The arbitration agreement contained in the arbitration clause in a
E contract is often referred to as a collateral or ancillary contract in relation
to the main contract of which it forms a part. The repudiation or breach '*
of the main contract may not put an end to the arbitration clause which
might still survive for measuring the claims arising out of the breach and
for determining the mode of their settlement. See Heyman & Anr. v.
F Darwins, Ltd., (1942) 1 All E.R. 337; Bremer Vulkan Schiffbau Und Mas-
chinenfabrik v. South India Shipping Corpn., (1981) 1 All E.R. 289. See also
Mustil & Boyd, Commercial Arbitration, 2nd ed. (1989). ~

The arbitration agreement may provide that all disputes which may
arise between the parties will be referred to arbitration or it may provide
G that a particular dispute between. the parties will be submitted to the
jurisdiction of a particular arbitrator. The arbitration clause may identify
the arbitrator or arbitrators and the place of arbitration or it may .leave
such matters to be determined by recourse to the machinery of an institu- >---
tional arbitration, such as the ICC, or the London Court of International
H Arbitration or the American Arbitration Association or similar institutions.
-
N.T.P.C. v. SINGER CO. [THOMMEN, J.) 125

Clause 27 of the General Terms of the Contract shows that it was A
+ the intention of the parties that disputes with a foreign contractor should
be referred to arbitration in accordance with the ICC Rules; while disputes
with an Indian contractor should be settled by arbitration in New Delhi on
an ad hoc basis.

The ICC Rules are made specifically applicable in respect of disputes B
with a foreign contractor because of the special nature of the contract. One
_, of the parties to such a contract being a foreigner, questions of private
international law (or conflict of laws) may arise particularly as regards
arbitral proceedings conducted in a foreign territory. In respect of an
c
-
Indian contractor, the transaction as well as the dispute settlement process
are completely localised in India and in the Indian legal system and there
is no scope for interference by a foreign system of law with the arbitral
proceedings.
~
An international commercial arbitration necessarily involves a foreign
element giving rise to questions as to the choice of law and the jurisdiction of D
courts. Unlike in the case of persons belonging to the same legal system,
contractural relationships between persons belonging to different legal sys-
terns may give rise to various private international law questions such as the
identity of the applicable law and the competent forum. An award rendered
in the territory of a foreign State may be regarded as a domestic award in E
~
India where it is sought to be enforced by reason of Indian law being the
proper law governing the arbitration agreement in terms of which the award
was made. The Foreign Awards Act, incorporating the New York Conven-
- tion, leaves no room for doubt on the point.

The ICC Rules provide for settlement by arbitration of business F
__j__ disputes of an international character. They furnish an institutionalised
procedure of arbitration. These Rules being a self-contained or a self-
~
regulating code, they operate more or less independently of judicial inter-
ference in the conduct of arbitration, except in so far as they conflict with
the mandatory requirements of the governing system of the proper law or
G
the procedural law of the place of arbitration. Party-autonomy in interna-
tional business is thus the guiding principle of the self-regulating
-~ mechanism envisaged by the ICC Rules, and interference by any Court with
the actual conduct of arbitration is to a large extent avoided.

The difference between an ad hoc arbitration and an institutional H
126 SUPREME COURT REPORTS (1992) 3 S.C.R.

A arbitration is not a difference between one system of law and another; for -+
whichever is the proper law which governs either proceeding, it is merely
a difference in the method of appointment and conduct of arbitration.
Either method is applicable to an international arbitration, but neither is
determinative of the character of the mmltant award, namely, whether or
not it is a foreign award as defined under the Foreign Awards Act, 1961.
B
Where the ICC Rules apply, there is generally little need to invoke
)~
the procedural machinery of any legal system in the actual conduct of
arbitration. These Rules provide for the submission of request for arbitra-
tion, the appointment of arbitrators, challenge against the appointment,
c pleadings, procedure, selection of the place of arbitration, terms of refer-
ence, time limit for award, cost, finality and enforceability, and similar
matters of procedure (Article 11 of the ICC Rules). The parties are free
-
· under the ICC Rules to determine the law which the arbitrator shall apply·
to the merits of the dispute. In the absence of any stipulation by the parties
D as to the applicable law, the arbitrators may apply the law designated as
the proper law by the Rules of Conflict which they deem to be appropriate
(Article 13 of the ICC Rules). These and other provisions contained in the
ICC Rules make them a self-contained and self-regulating system, but
subject to the overriding powers of the appropriate mitional courts.*
E
A 'foreign award', as defined under the Foreign Awards Act, 1961 "*
means an award made or on after 11.10.1960 on differnces arising between
persons out of legal relationships, whether contractual or not, which are
considered to be commercial under the law in force in India. To qualify as
-
,-

F a foreign award under the Act, the award should have been made in
pursuance of an agreement in writing for arbitration to be governed by the
~
Ne':" York convention on the Recognition and Enforcement of Foreign
f'
Arbitral Awards, 1958, and not to be governed by the law of India.
Furthermore such an award should have been made outside India in the
territory of a foreign State notified by the Government of India as having
G made reciprocal provisions for enforcement of the Convention. These are
the conditions which must be satisfied to qualify an award as a 'foreign
award' (S.2 read with S.9). >-
See /CC Rules of Arbitration, 1988; See also Craig, Park and Paulsson, International
H Chamber of Commerce Arbitration, 2nd ed. (1990).
,,. N.T.P.C. v. SINGER CO. [THOMMEN, J.] 127

An award is 'foreign' not merely because it is made in the territory A
+ of a foreign State, but because it is made in such a territory on an
arbitration agreement not governed by the law of India. An award made
on an arbitration agreement governed by the law of India, though rendered
outside India, is attracted by the saving clause in S.9 of the Foreign Awards
Act and is, therefore, not treated in India as a 'foreign award'.
B
A 'foreign award' is (subject to section 7) recognised and enforceable
in India 'as if it were an award made on a matter referred to arbitration in
' India' (S.4). Such an award will be ordered to be filed by a competent court
in India which will pronounce judgment according to the award (S.6).
c
- Section 7 of the Foreign Awards ·Act, in consonance with Art. V of
the New York Convention which is scheduled to the Act, specifies the
conditions under which recognition and enforcement of a foreign award
-..,..., will be refused at the request of a party against whom it is invoked.
D
A foreign award will not be enforced in India if it is proved by the
party against whom it is sought to be enforced that the parties to the
agreement were, under the law applicable to them, under some incapacity,
or, the agreement was not valid under the law to which the parties have
subjected it, or, in the absence of any indication thereon, under the. law of
-;;k the place of arbitration; or there was no due compliance with the rules of E
fair hearing; or the award exceeded the scope of the submission to arbitra-
tion; or the composition of the arbitral authority or its procedure was not
in accordance with the agreement of the parties, or, failing such agreement,
was not in accordance with the law of the place of arbitration; or 'the award
has not yet become binding on the parties, or has been set aside or F
suspended by a competent authority of the country in which, of under the
_i law of which, that award was made'. The award will not be enforced by a
court in India if it is satisfied thatthe subject matter of the award is not
capable of settlement by arbitration under Indian law or the enforcement
of the award is contraty to the public.policy.
G
The Foreign Awards Act contains a specific provision to exclude its
---4.. operation to what may be reg3:1"ded as 'domestic award' in the sense of the
- award having been made on an arbitr~tion agreement governed by the law
of India, although the dispute was with a foreigner and the arbitration was
held and the award was made in a foreign State. H
128 SUPREME COURT REPORTS (1992) 3 S.C.R. ·

A Section 9 of this Act says :-
+
"Nothing in this Act shall

(a) ....................................................... .

B (b) apply to any award made on an arbitration agreement
governed by the law of India."

Such an award necessarily falls under the Arbitration Act, 1940, and
is amenable to the jurisdiction of the Indian Courts and controlled by the
C Indian system of law just as in the case of any other domestic award, except
that. the proceedings held abroad and leading to the award were in certain
respects amenable to be controlled by the public policy and the mandatory
requirements of the law of the place of !llbitration and the competent
-
courts of that place.

D It is important to recall that in the instant case the parties have
expressly stated that the laws applicable to the contract would be the laws
in force in India and that the courts of Delhi would have exclusive juris~
diction 'in all matters arising under this contract'. They have further stated
that the 'Contract shall in all respects be construed and governed according
to Indian laws'. These words are wide enough to engulf every question
E arising under the contract including the disputes between the parties and
the mode of settlement. It was in Delhi that the agreement was executed.
The form of the agreement is closely related to the system of law in India.
Various Indian enactments are specifically mentioned in the agreement as
applicable to it in many respects. The contract is to be performed in India
F with the aid of Indian workmen whose conditions of service are regulated
by Indian ·laws. One of the parties to the contract is a public sector under-
taking. The contract has in every respect the closest and most real connec-
tion with the Indian system of law and it is by that law that the parties have
expressly evinced their intention to be bound in all respects. The arbitration
agreement is contained in one of the clauses of the ·contract, and not in a
G separate agreement. In the absence of any indication to the contrary, the
governing law of the contract (i.e., in the words of Dicey, the proper law
· of the contract) being Indian law, it is that system of law which must
neces5arily govern matters concerning arbitration, although in certain
respects the law of the place of arbitration may have its relevance in
H regards to procedural111atters.
N.T.P.C. v. SINGER CO. (THOMMEN, J.] 129

It is true that an arbitration agreement may be regarded as a C91- A
lateral or ancillary contract in the sense that it survives to determine the
claims of the parties and the mode of settlement of their disputes even after
the breach or repudiation of the main contract. But it is not an independent
contract, and it has no meaningful existence except in relation to the rights
and liabiltities of the parties under the main contract. It is a procedural B
machinery which is activated when disputes arise between parties regarding
their rights and liabilities. The law governing such rights and liabilities is
the proper law of the contract, and unless otherwise provided, such law
. .(
governs the whole contract including the arbitration agreement, and
praticularly so when the latter is contained not in a separate agreement,
but, as in the present case, in one of the clauses of the main contract. C
Significantly, London was chosen as the place of arbitration by
reason of Article 12 of the ICC Rules which reads :
- .__,.__
"The place of arbitration shall be fixed by the International
Court of Arbitration, unless agreed upon by the parties." D
The parties had never expressed their intention to choose London as
the arbitral forum, but, in the absence of any agreement on the question,
London was chosen by the ICC Court as the place of arbitration. London
has no significant connection with the contract or the parties except that it E
is a neutral place and the Chairman of the Arbitral Tribunal is a resident
there, the other two members being nationals of the United States and
I_ndia respectively.

- The decisions relied on by counsel for the Singer do not support his
contention that the mere fact of London being the place of arbitration f
•---'-
excluded the operation of the Arbitration Act, 1940 and the jurisdiction of
the courts in India. In James Miller & Partners Ltd. v. Whitworth Street
Estates (Manchester) Ltd. (1970) AC 583, the parties had not expressly
stated which law was to govern their contract. On an analysis of the various
factors, the Ho~se of Lords held that in the absence of any choice of the
law governing arbitration proceedings, those proceedings were to be con- G
sidered to be governed by the law of the place in which the' arbitration was
held, namely, Scotland because it was that system of law which was most
closely connected with the proceedings. Various links"Wi.th Scotland, which
was the place of performance of the contract, unmistakably showed that
the arbitral proceedings were to be governed by the law of Scotland, H
130 SUPREME COURT REPORTS [1992) 3 S.C.R. ..
A although the majority of the learned Law Lords (Lords Reid and Wilber-
force dissenting on the point) held that, taking into account certian other
factors, the contract was governed by English law. That case is no authority
for the proposition that, even where the proper law of the contract is
expressly stated by the parties, and in the absence of any contrary indica-
tion, a differnt law governed arbitration. The observations contained in that
B judgment do not support the contention urged on behalf of the Singer that
merely because London wa~ designated to be the place of arbitration, the
law which governed arbitration was different from the law expressly chosen
by the parties as the proper law of the contract.

C It is true that the procedural law of the place of arbitration and the
courts of that place cannot be altogether excluded, particularly in respect
of matters affecting public policy and other mandatory requirements of the
legal system of that place. But in a proceeding such as the present which
is intended to be controlled by a set of contractual rules which are self-
D sufficient and designed to cover every step of the proceeding, the need to
have recourse to the municipal system of law and the courts of the place
of arbitration is reduced to the minimum and the courts of that place are
unlikely to interfere with the arbitral proceedings except in cases which
shock the judicial conscience. See the observations of Kerr U in Bank
Mel/at v. Helliniki Techniki SA, (1983) 3 All E.R. 428.
E
Courts would give effect to the choice of a procedural law other than
the proper law of the contract only where the parties had agreed that
matters of procedure should be governed by a different system of law. If

F
the parties had agreed that the proper law of the contract should be the
law in force in India, but had also provided for arbitration in a foreign
-
country, the laws of India would undoubtedly govern the validity, inter-
pretation and effect of all clauses including the arbitration clause in the
contract as well as the scope of the arbitrators' jurisdiction. It is Indian law
which governs the contract, including the arbitration clause, although in
certain respect regarding the conduct of the arbitration proceedings the
G foreign procedural law and the competent courts of that country may have
a certian measure of control. Sec the principle stated by Lord Denning,
M.R. in l11tematio11a/ Tank and Pipe SAK v. Kuwait A'•iatio11 Fueling Co.
KSC, (1975) 1 All E.R. 242.

H The arbitration clause must he considered together with the rest of
N.T.P.C. v. SINGER CO. [THOMMEN, J.) 131

the contract and the relevant surrounding circumstances. In the present A
+ case, as seen above, the choice of the place of arbitration was, as far as the
parties are concerned, merely accidental in so far as they had not exptessed
any intention in regard to it and the choice was made by the ICC Court
for reasons totally unconnected with either party to the contract. On the
'--
other hand, apart from the expressly stated intention of the parties, the
B
contract itself, including the arbitration agreement contained in one of its
clauses, is redolent of India and matters Indian. The disputes between the
parties under the contract have no connection with anything English, and
they have the closest connection with Indian laws, rules and regulations. In
the circumtances, the mere fact that the venue chosen by the ICC Court
for the conduct of arbitration is London does not support the case of the c
Singer on the point. Any attempt to exclude the jurisdiction of the com-
petent courts and the laws in force in india is totally inconsistent with the
agreement between the parties.

In sum, it may be stated that the law expressly chosen by the parties D
in respect of all matters arising under their contract, which must necessarily
include the agreement contained in the arbitration clause, ':ieing Indian law
and the exclusive jurisdiction of the courts in Delhi having been expressly
recognised by the parries to the contract in all matters arising under it, and
the contract being most intimately associated with India, the proper law of
arbitration and the competent courts are both exclusively Indian, while E ·
matters of procedure connected with the conduct of arbitration are left to .
be regulated by the contractually chosen rules of the ICC to the extent that
such rules are not in conflict with the public policy and the mandatory
requirements of the proper law and of the law of the place of arbitration.
The Foreign Awards Act, 1961 has no application to the award in question F
which has been made on an arbitration agreement governed by the law of
India.

The Tribunal has rightly held that the 'substantive law of the contract
is Indian law'. The Tribunal has further held 'the laws of England govern
procedural matters in the arbitration'. G

All substantive rights arising under the agreement including that
which is contained in the arbitration clause are, in our view, governed by
the laws of India. In respect of the actual conduct of arbitration, the
procedural law of England may be applicable to the extent that the ICC H
132 SUPREME COURT REPO.RTS (1992) 3 S.C.R.

A Rules are insufficient or repugnant to the public policy or other mandatory
provisions of the laws in force in England. Nevertheless, the jurisdiction · +
exercisable by the English courts and the applicability of the laws of that
country in procedural matters must be viewed as concurrent and consistent ·
with the jurisdiction of the competent Indian courts and the operation of
Indian laws in all matters concerning arbitration in so far as the main
B contract as well as that which is contained in the arbitration clause are
governed by the laws of India.

The Delhi High Court was wrong in treating the award in question
)-. - .
as a foreign award. ThP, Foreign Awards Act has no application to the
C award by reason of the specific exclusion contain¢d in Section 9 of that
Act. The award is governed by the laws in force in India, including the
Arbitration Act, 1940. Accordingly, we set aside the impugned judgment
of the Delhi High Court and direct that Court to consider the appellant's
-
application on the merits in regard to which. we express no views what-
so~ver. The appeal is allowed in the above terms. We do not, however,
D make any order as to costs.

G.N. Appeal allowed.