No right of appeal where arbitration seat is abroad

By Vivek Vashi and Jehangir Jejeebhoy, Bharucha & Partners
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Where parties have negotiated and agreed Singapore as the seat of an arbitration and further agreed that the arbitration proceedings are to be conducted in accordance with the Singapore International Arbitration Centre (SIAC) Rules, but where the agreement is governed by the laws of India, would an appeal under section 37 of the Indian Arbitration and Conciliation Act, 1996, against an interim order of the arbitrator be maintainable?

Considering the question in Yograj Infrastructure Ltd v Ssang Yong Engineering & Construction Co Ltd, the Supreme Court has held that in such a case, the law as laid down by the Supreme Court in Bhatia International v Bulk Trading SA would have no application and Part I of the Indian act, including the right to appeal under section 37, would be excluded.

Brief facts

Awarded a contract by the National Highways Authority of India, Ssang Yong Engineering & Construction Co (SY) subcontracted the work to Yograj Infrastructure. On account of delay in performance, SY terminated the subcontract with Yograj. Consequently, both parties filed applications under section 9 of the Indian act before a district judge seeking interim relief.

Vivek Vashi Partner Bharucha & Partners
Vivek Vashi
Partner
Bharucha & Partners

The dispute was ultimately referred to arbitration before a sole arbitrator, where once again the parties filed applications for interim relief, this time under section 17. Aggrieved by the arbitrator’s interim order after considering both applications, Yograj preferred an appeal under section 37 of the Indian act.

Without going into the merits, the district judge dismissed Yograj’s appeal as not maintainable on the ground that the seat of the arbitration was Singapore and the proceedings were to be conducted in accordance with the SIAC Rules, which stipulated that the Singapore International Arbitration Act, 2002, would apply. Yograj’s civil revision application impugning this decision before the high court was dismissed, resulting in a challenge before the Supreme Court.

Arguments and conclusion

Yograj argued that the SIAC Rules would only apply to the arbitration proceedings and not to appeals from such proceedings – the right to appeal being a substantive right under the Indian act. It was also argued that the SIAC Rules, which provide that the Singapore act would apply, is in direct conflict with the Indian act as to the applicable law of the arbitration, and the applicable law would prevail.

Yograj further contended that, as laid down by Bhatia International, Part I of the Indian act had not been excluded by the arbitration agreement and would therefore apply. Relying on Sumitomo Heavy Industries Ltd v ONGC, Yograj argued that the proper law of the agreement (the law applicable in deciding the referred disputes) would be the Indian act whereas the Singapore act would be the curial law (the law to govern the procedural aspect of the dispute).

Jehangir Jejeebhoy Associate Bharucha & Partners
Jehangir Jejeebhoy
Associate
Bharucha & Partners

Rejecting Yograj’s arguments and distinguishing the present case from Bhatia International, the apex court held that the parties having agreed to the Singapore act as the curial law of the arbitration proceedings, “it was no longer available to the appellant to contend that the ‘proper law’ of the agreement would apply to the arbitration proceedings”.

Dismissing Yograj’s appeal, the Supreme Court held that once the parties had agreed that the arbitration proceedings would be governed by the SIAC Rules, the case of Bhatia International would not apply.

The court clarified that the SIAC Rules became applicable on commencement of the arbitration proceedings, “shutting out the applicability of Section 42 and for that matter Part I of the 1996 Act, including the right of appeal under Section 37 thereof”. The present case seems to be in line with the recent pro-arbitration decisions in Videocon Industries Ltd v Union of India and in M/s Dozco India Pvt Ltd v M/s Doosan.

Landmark conveyancing case

In Suraj Lamp & Industries v State of Haryana, the Supreme Court dealt with the problem of transfer of immovable property through what is known as general power of attorney sales. Such sales circumvent restrictions on certain types of transfers, avoid the payment of stamp duty, registration and capital gains tax and facilitate an extraneous component in the transaction.

The court recognized that upholding the validity of such transactions would effectively permit vendors to enter into (and circumvent) transactions where they held an imperfect title, possibly cheat the purchaser by reselling property previously sold by them and leave room for tax offenders to invest huge sums of undeclared wealth in the real estate market. Consequently, it was held that such sales do not convey any title nor do they create any interest in an immovable property. For the sake of avoiding unnecessary hardship, the decision will apply prospectively.

Vivek Vashi is a partner in the litigation department at Bharucha & Partners where Jehangir Jejeebhoy is an associate.

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