inventa Fischer Gmbh and Co. Vs. Polygenta Technologies Ltd. - Court Judgment

Dharmadhikari S.C., J.

1. This petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 1996 Act) to challenge an award dated 21st October, 2003 passed by International Court of Arbitration in Case No. 1107/03/D.K. There are certain alternative prayers but for the purpose of deciding the issue before me it is not necessary to advert to the same.

2. In paras 9 and 10 of petition this is what is stated :-

'9. The petitioner submits that the present petition under Section 34 of the Act is maintainable against the impugned award because the agreements between the parties are clearly governed by the law of India. The award in question, therefore, is a domestic award and/or an award under Part I of the Act, although made in Geneva under the I.C.C. Rules. The law declared by this Hon'ble Court in N.T.P.C. and Singer clearly supports the present petition. Recently, the Hon'ble Supreme Court in Bhatia International case has clearly held that Part I of the Act applies to all arbitrations including those made in International Commercial Arbitrations taking place outside India. Part I includes Section 34 and, therefore, the present petition is clearly maintainable. It is submitted that courts in India can examine the challenge against the impugned award that is governed by the India laws.

10. That this Hon'ble Court has the necessary territorial jurisdiction to entertain the present petition because inter alia, the agreements in question were entered in Bombay. It is submitted that the Arbitration Agreements were also entered in Bombay. Further, the principal officer of the respondent/claimant is also situated in Bombay. It is, therefore, submitted that the jurisdiction is with this Hon'ble Court.'

3. This Court admitted this petition on 1st March, 2004. However, while admitting the petition this Court made it clear that though petition is admitted, the issue of maintainability is expressly kept open.

4. This matter comes before me by virtue of two Notices of Motion taken out in the petition. In substance, the Notice of Motion prays that implementation and execution of the award be suspended pending hearing and final disposal of petition. When the Notice of Motion was placed before me, it was agreed by learned Counsel appearing for both sides that petition itself be listed for hearing and final disposal peremptorily. Hereafter, petition was placed for final disposal on 15th April, 2004. On 16th April, 2004, 22nd April, 2004 and 24th April, 2004, I heard learned Counsel for parties. Since respondent No. 1 persisted with its objection of maintainability, detailed arguments were canvassed by learned Senior Counsel on this issue after research with precision. I am thankful for the assistance rendered by them.

5. The award is challenged in so far as it grants the claim of respondents original respondent No. 1 along with costs and interest. The Arbitral Tribunal directed that a sum of EURO 1,82,786/- be paid by way of compensation and damages for alleged breach of contract together with interest at 9% p.a. from 1st August, 2001 till 21st October, 2003 i.e. the date of the award and thereafter at the rate of 6% p.a.

6. The present award arises out of an agreement dated 12th August, 1996, 7th October, 1996 and agreement for supply of technology and know-how, basic and detailed engineering (technology agreement) dated 6th November, 1996. It is not disputed that the aforesaid agreements were executed by respondent No. 1 - claimants and petitioner for recycling and upgrading plant to convert PET waste to POY and polyester chips in India. The Arbitration clauses are to be found in the supply agreement and the technology agreement in Chapters 12 and 10 respectively. Clauses 12.2 and 10.2 are reproduced herein below :-

'12.2 All disputes arising in connection with this agreement shall be settled through mutual negotiations. In case no settlement can be reached the case may be submitted to an Arbitration Institute which works in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris. The decision rendered by three (3) Arbitrators appointed in accordance with the said Rules shall be final and binding upon both parties, neither shall seek recourse to a law Court or other authorities for revising the decision. Arbitration shall be held in Geneva, Switzerland and the arbitration fee shall be borne by the losing party.'

10.2 All disputes arising in connection with this Agreement shall be settled through mutual negotiations. In case no settlement can be reached the case may be submitted to an Arbitration Institute which works in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris. The decision rendered by the three (3) arbitrators appointed in accordance with the said Rules shall be final and binding upon both parties, neither parry shall seek recourse to a law Court or other authorities for revising the decision. Arbitration shall be held in Geneva, Switzerland and the arbitration fee shall be borne by the losing party.'

7. It is stated in the petition that both the agreements are to be interpreted in accordance with laws of Republic of India. Even the terms of reference framed by Arbitral Tribunal with consent of parties expressly provided that :-

'The Tribunal will take account of the provisions of Chapter 12 of the Swiss Private International Law of 1987 as the seat of the arbitration is in Geneva, Switzerland, and at the time of the conclusion of the arbitration agreement neither party had its domicile or its habitual residence in Switzerland.

The procedure of this arbitration shall be governed by the I.C.C. Rules of Arbitration in force as from 1st January, 1998. In so far as those Rules are silent on any matter of evidence, the Tribunal will follow the I.B.A. Rules on the Taking of Evidence in International Commercial Arbitration of 1999.'

8. Shri Chinoy, learned Senior Counsel appearing for respondent No. 1 after inviting my attention to the consent accorded for applying Chapter 12 of Swiss Private International Law of 1987, the City of Arbitration Geneva, Switzerland and the procedure to be adopted governed by I.C.C. Rules for Arbitration in force from 1st January, 1998 contended that the present petition filed under Section 34 is ex facie not maintainable and deserves to be dismissed without any adjudication on merits. In his submission, award is made at Geneva which is the place of Arbitration. He submits that the arbitration was to be governed by I.C.C. Rules for arbitration. He submits that by virtue of the consent order dated 7th March, 2002 the Arbitration was not to be governed by Indian Arbitration Act 1996. In his submission, the applicable law or proper law of contract may be laws of Indian Republic but that by no stretch of imagination would mean that the present award which is admittedly a foreign award can be challenged by taking recourse to Section 34 of 1996, Act. Elaborating his submissions Shri Chinoy contends that in the present case, the curial law was admittedly Swiss law and the Arbitration proceedings were admittedly conducted at Geneva under Swiss law and the I.C.C. Rules. In fact Indian Arbitration Act, 1996 Part I was never referred during the Arbitration proceedings. According to him, the award made in Switzerland is a foreign award under Section 34 of the Act. Such an award is incapable of being challenged by taking recourse to Section 34 of the 1996 Act. Shri Chinoy submits that such an award can only be resisted in its enforcement in India and there is no provision in law by which it could be challenged. Shri Chinoy invited my attention to the provisions of Foreign Award (Recognition and Enforcement) Act, 1961 (Foreign Act) and in particular Section 9(b) thereof. He submits that Section 9(b) of Foreign Act was not consistent with the terms of New York Convention of 1958 and was deleted in 1996 Act. However, Legislature has, while deleting Section 9(b) retained Section 9(a) of Foreign Act (Section 51 in the 1996 Act). The deletion of Section 9(b) of Foreign Act is not without any significance. Shri Chinoy contends that under the 1996 Act an award made in the foreign/notified Country would be a foreign award irrespective of substantive law governing the contract or the law governing the arbitration agreement. He submits that the petition is filed on the basis that agreement between parties being governed by law of India, the award is a domestic award. According to Shri Chinoy this submission is fallacious. He submits that there is no question of substantive law deciding the issue of maintainability of petition. He submits that challenge to the award is one thing and resisting its enforceability is another. The Legislature in its wisdom has, qua a foreign award, only provided for mechanism to resist its execution or enforcement. The Legislature has taken care and permits parties to raise same grounds while resisting the enforcement or execution as are permissible to be raised while challenging a domestic award under Section 34 of the 1996 Act. In other words, he submits that Section 48 and more particularly Section 48(1)(e) read with other substantive provisions makes it abundantly clear that although it is not permissible to challenge a foreign award, it could be resisted in its enforcement on the same ground as are available while challenging a domestic award. Shri Chinoy submits that merely because such a course is permissible, it would not mean that the Legislature has provided for an additional remedy viz., challenge to foreign award. He submits that the distinction will have to be borne in mind constantly otherwise it would mean that not only a foreign award can be resisted when it is sought to be enforced in India but even prior to that it could be challenged by taking recourse to the provisions of Section 34 of 1996 Act.

9. Shri Chinoy submits that three aspects have to be noted when such an issue is being decided. Firstly, the law applicable to the parent or substantive contract; secondly the law applicable to the arbitration which is law of Arbitration and thirdly, the procedural law of Arbitration. He submits that in the present case, the applicable procedural law governing arbitration proceedings i.e. the curial law was admittedly the Swiss law. It may be that curial law continues to operate till the award is made. But considering the phraseology of Arbitration and Conciliation Act and more particularly Section 2, 44, 48 and 49, it will not be permissible to hold that upon the curial law ceasing to operate, it is open to take recourse to Section 34 of the 1996 Act, merely because substantive law/proper law of contract was Indian law. That would, according to Shri Chinoy, be contrary to Section 48(1)(e) of the 1996 Act which reads as under :-

'48(1)(e):- Conditions for enforcement of foreign awards :- (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court prove that-

(a) ....

(b)....

(c)....

(d)....

(e) 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.'

10. Shri Chinoy was at pains to point out that deletion of Section 9(e) from the Foreign Act is something which cannot be brushed aside. He contends that Section 9(b) of Foreign Act and Section 44 of 1996 Act read with Article 1(1) of 1958 Convention deal with totally different aspect. Section 9(b) treated a class of foreign awards as domestic awards by excluding them from Foreign Act. Latter part of Article 1(1) of 1958 Convention treated class of local/domestic awards as foreign awards by including in from the definition of foreign award. After inviting m attention to the Convention and the provision of Foreign Act, Shri Chinoy contends that now the field is occupied and covered by Section 48(1)(e) of the Act which is on par with Article V(1)(e) of the Convention. He submits that bare reading of Section 48(1)(e) would demonstrate that a Foreign Award can be challenged in a country in which it was made or the Country under law of which it was made. It provides that if the award has been challenged or suspended or set aside by any of these two statutory recognised forums, then it will provide a defence to the recognition and enforcement of the award. In the present case, the award was made in Geneva, Switzerland which is admittedly a notified country. Therefore, it can be challenged only in Switzerland. Similarly, other forum is the Country under the law of which the award was made, which in the instant case, also is Switzerland and, therefore, the award could only be challenged in Swiss courts. He submits that having regard to this provision no proceedings to set aside or suspend the award can be filed in a Indian Court. This even assuming that the substantive proper law of the Arbitration Agreement (in contradistinction to the procedural/curial law which governs arbitration proceedings) was Indian law. This is because in the facts and circumstances of the present case, the proper law of arbitration agreement would also be Swiss law.

11. Shri Chinoy has not only invited my attention to the New York convention but he has also taken me through provisions of the 1996 Act. Shri Chinoy has also invited my attention to passages from Dicey and Morris 'Conflict of Laws' 12th Edition, Dicey and Morris, 'Conflict of Laws' 13th Edition. He has invited my attention to Mustill and Boyd Commercial Arbitration, Second Edition 90 footnote 4. In addition to this Shri Chinoy has invited my attention to the decisions of Supreme Court in the case of N.T.P.C. v. Singer, reported in 1992(3) S.C.C. 51 and in the case of Sumitomo Heavy Industries Ltd. v. ONGC Ltd., reported in : AIR1998SC825 . Shri Chinoy has also invited my attention to the decision of the U.S. District Court in the case of International Standard Electric v. Brides, reported in 745(F) Supp. 178. This decision refers to one decision of our Supreme Court in the case of O.N.G.C. v. Western, reported in : [1987]1SCR1024 .

12. In the submission of Shri Chinoy, the controversy before this Court is concluded fully by the decision in the case of Bombay Gas Company Limited v. Mark Victor Mascarenhas 1998(I) L.J. 977. Similarly, by the decision of this Court (Deshmukh, J.) in the case of Jindal Drugs v. Noy Vallesina Engineering, S.P.A., Italy, reported in : 2002(3)BomCR554 . Shri Chinoy submits that the decision of the Supreme Court in the case of Bhatia International v. Bulk Trading S.A. : [2002]2SCR411 .. which has been relied upon by petitioner in support of its case has no application to the issue before this Court. Assuming that some observations could be said to have some bearing on the controversy, Shri Chinoy submits that the same would have to be read in the context of issue before the Supreme Court viz., applicability of Section 9 of the Act to an International Commercial Arbitration and Arbitration proceedings conducted outside India. He submits that even this judgment of the Supreme Court has been referred to by a Single Judge of this Court in the case of Force Shipping v. Ashapura Minechem Ltd., reported in : 2003(6)BomCR328 . This Court (Rebello, J.) held that even after the decision in Bhatia International's case, legal position is the same viz., that a foreign award cannot be challenged in India By taking recourse to Section 34 of the Act.

13. Summing up, Shri Chinoy contends that in similar cases before this Court:-

(a) Awards had been made in foreign notified country though substantive law governing the contracts was Indian law. In such cases Court dismissed the petitions as not maintainable and accordingly did not consider the same on merits.

(b) Present award has been made in Geneva, Switzerland against petitioner which is a German Company.

(c) Petitioner has not challenged the award in Switzerland where it has become final;

(d) Award is in force in Germany against petitioner.

(e) Petitioner is resisting enforcement on the ground similar to Section 48 of the Act.

(f) At the same time, petitioner (German Company) is purporting to file this petition challenging foreign award made in Geneva in this Court. Hence, the petition is not maintainable and deserves to be dismissed as such.

14. On the other hand, Shri Dave, learned Senior Counsel appearing for petitioner contended that respondent No. 1 is an Indian party. It is the successful party in the arbitral proceeding. He submits that the award is dated 21st October, 2003. The present petition is filed on 23rd January, 2004. Caveat filed by respondent No. 1 was served on 31st January 2004. On 16th February 2004, Managing Director of respondent No. 1 fields an affidavit and deals with objections both about maintainability and on merits. However, it is pertinent to note that even at this stage, it was not mentioned to this Court that respondent No. 1 has assigned its benefits under the award in favour of respondent No. 2. On 17th February, 2004 the matter was placed before this Court and respondent No. 1 appears at this stage. The matter is adjourned to 1st March, 2004 for filing detailed affidavit in reply. On 27th February, 2004 a detailed affidavit in reply is filed by legal manager of the company. Referring to para 17 of the same, Shri Dave contends that serious prejudice will be cause to respondent No. 1 is the submission in this affidavit. However, there is no mention of assignment in this affidavit. It is clear that assignment deed dated 25th November, 2003 is suppressed. Respondent No. 1 has committed perjury. It has suppressed a vital aspect of assignment from this Court. He submits that conduct of respondent No. 1 is reprehensible. He submits that agreements between petitioner and respondent No. 1 bar assignment without prior consent of petitioner. He submits that respondent No. 1 is facing proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 and before Debt Recovery Tribunal under R.D.B. Act, 1993. There is restraint on transfer of moveables. It is on 1st March, 2004 that respondent No. 1 appeared and petition is admitted.

15. Shri Dave contends that on 2nd March, 2004 the aspect of deed of assignment dated 25th November, 2003 is brought to the notice of this Court by annexing the same at Exh. A to the affidavit dated 2nd March, 2004. On 4th March, 2004 a motion is filed. Respondent No. 2 was impleaded. Respondent No. 2 refused service on 23rd March, 2004. Thereafter, this Court orders suspension of Award.

16. Shri Dave submits that the assignment is only with a view to get out of jurisdiction of this Court. A fraud has been perpetrated and the Court should not assist such litigant. In substance, Shri Dave contended that the conduct of respondent No. 1 is such that it is not entitled to raise the issue of maintainability of petition. Consequently, the objection raised on behalf of such a party should not be countenanced and entertained by this Court.

17. Alternatively, it is contended by Sir Dave that the 1996 Act allows filing of such a petition. He submits that the Act is a consolidated Act. He submits that Section 9(b) of the Foreign Act was introduced by way of abundant caution and its deletion does not alter the legal position. He further submits that equivalent provisions continue in Article 1(1) of New York Convention read with Section 44 of the 1996 Act. Shri Dave submits that the manner in which Shri Chinoy reads 1996 Act is not proper and would defeat and frustrate the mandate of Legislature.

18. Shri Dave contends that the main object of the Legislature while introducing the 1996 Act is to consolidate and amend the law relating to domestic arbitration, international arbitration and enforcement of foreign Arbitral Awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. He submits that the United Nations Commission of International Trade Law (UNCITRAL) has adopted UNCITRAL Model Law of International Commercial Arbitration. After inviting my attention to Statement of Objects and Reasons of 1996 Act, it is contended by Shri Dave that law of arbitration in India was earlier substantially contained in three enactments, viz., Arbitration Act, 1940, Arbitration (Protocol and Convention) Act, 1937 and the Foreign Act. The Legislature in its wisdom has made 1996 Act with a view to comprehensively cover International and Commercial Arbitration and Conciliation as also domestic arbitration and conciliation. He invites my attention to Section 1 of the Act. He invites my attention to Part I, Chapter 1 containing general Provisions. Shri Dave relies upon definition of the terms 'Arbitration', 'Arbitration Agreement', 'Arbitral Tribunal', 'Court' and 'International Commercial Arbitration', 'Arbitral Tribunal'. Shri Dave contends that reading of Section 2(2) and Section 2(5) as well as Section 2(7) leaves no manner of doubt that Arbitral Award made under this Part shall be considered as a domestic award. Shri Dave further submits that Sections 7 to 9 falling under Chapter II Section 10 to 15 falling in Chapter III, Sections 16 and 17 falling in Chapter IV are provisions pertaining to arbitration agreement and composition of Arbitral Tribunal as well as its jurisdiction. Chapter V of 1996 Act, entitled conduct of arbitral proceedings is nothing but curial law. Shri Dave invites my attention to Sections 19 to 22 appearing in this Chapter and contends that there is nothing by which it could be said that provisions such as these do not apply when venue or place of arbitration is outside India. He submits that Chapter VI containing Section 28 is entitled 'making of Arbitral Award and termination of proceedings'. Thereafter, Chapter VII appears which is entitled 'recourse against Arbitral Award'. This will have to be read with Section 2(c). Shri Dave contends that Part II deals with enforcement of certain foreign awards. Chapter I therein deals with New York convention awards. Shri Dave invites my attention to Sections 44, 45, 46 and 48 together with the First Schedule Article I and Article III. He invites my attention to Article V and Article VI. He submits that considering the scheme of the Act, it is clear that Part I thereof applies to all arbitrations outside India. Consequently, any award arising out of such proceedings would be an award which is capable of being challenged in Indian Court by invoking Section 34 of the 1996 Act. In order words, such award is nothing but a domestic award.

19. He submits that governing law of contract is the test. Substantive law of agreement/underlying contract would govern all matters including challenge to the Arbitral Award, which is part and parcel of the substantive contract, he submits that any other interpretation would mean that even though, the underlying contract is governed by Indian Law, merely because the venue or place of arbitration is outside India, the award becomes a foreign award, incapable of being challenged in India under 1996 Act. He submits that this would cause severe injustice and grave prejudice to parties who choose to govern the underlying contract by Indian Laws. The very concept of applying Indian Laws to underlying contract would be rendered useless and redundant if the award arising out of an arbitration agreement contained in any such contract delivered outside India cannot be challenged in India. In other words, the applicable law of arbitration and the applicable procedural law of arbitration are aspects which should not and could never govern challenge procedure.

20. Referring to the decisions cited by Shri Chinoy it is contended by Shri Dave that these decisions delivered by Single Judges of this Court do not proceed upon correct and proper reading of the law laid down by the Supreme Court in the cases of O.N.G.C. and Bhatia International He submits that the law laid down by the Supreme Court in these decisions is binding on everybody by virtue of Article 141 of the Constitution of India. He submits that the Supreme Court in all these decisions has considered the issue in the light of the governing law of contract i.e. proper law of the contract/underlying contract. The Supreme Court in these decisions has emphasised that if such law is an Indian Law, then wherever the award may be made and under whichever law/procedure of arbitration, the award is capable of being challenged on the ground that it still retains its character as domestic award. In other words, domestic law applying to the underlying contract would make the award domestic award as contra distinguished from foreign award, the place or venue of Arbitration being wholly irrelevant. He submits that the moment Supreme Court decisions are appreciated in this manner, then it becomes clear that learned Single Judges have missed the substance or crux of the issue. Therefore, the Supreme Court decisions being binding, the law laid down in the Single Judges decisions of this Court would not apply.

21. Shri Dave, with equal force contends that the principles culled out from books of eminent persons like Dicey and Morris, Mustill and Boyd would go to show that these are consistent with the approach of Indian Supreme Court i.e. applicability of the law governing underlying contract in such matters.

22. For all these reasons, submits Shri Dave that the instant petition is maintainable and be heard on merits.

23. At the outset, it is not possible to accept the contention of Shri Dave that respondent No. 1 is disentitled from raising the issue of maintainability in view of its conduct. It is well settled that if the Court does not have authority or power to take cognisance of such a petition in law, then that issue is an issue of its jurisdiction. Such issues go to the root of the matter. Such issues are accordingly decided on the touch stone of law and not by considering the conduct of party raising them. No general rule can be laid down and the matter is to be considered on the facts of each case. The conduct may be or may not be blameworthy or reprehensible but ultimately if the Court does not have jurisdiction and proceedings are not maintainable, then it is wholly irrelevant. Suffice it to state that if the action and conduct is such as would amount to perjury or contempt, then even if the main petition is not maintainable, the Court is not powerless to initiate proceedings to punish the guilty. That apart, respondent No. 1 is a party to the petition. It is the successful party in Arbitral proceedings. The deed of assignment dated 25th November, 2003 executed by it in favour of respondent No. 2 is also challenged by the petitioner. In these circumstances, respondent No. 1 cannot be precluded from raising the issue of jurisdiction and maintainability.

25. For properly appreciating rival contentions, a reference to Section 34 of the 1996 Act is necessary. Bare perusal of the same would indicate that recourse to a Court against an Arbitral Award may be made only by an application for setting aside such award in accordance with Sub-sections (2) and (3). The word 'Arbitral Award' is defined to include an interim award. The word 'Court' is defined in Section 2(e). It means the principal Civil Court of Original Jurisdiction of district and includes the High Court in exercise of its Ordinary Original Civil Jurisdiction, having jurisdiction to decide questions forming the subject-matter of the arbitration as if the same had been the subject matter of a suit. Further, Section 34 makes it clear that the Arbitral Award may be set aside by the Court only after Sub-section (2) thereof is attracted and the party making the application furnishes proof about satisfaction of the same. It is undisputed that Section 34 appears in Part I. Part II is entitled 'Enforcement of certain foreign awards.' Section 44 defines what is a foreign award. It 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 relationships, whether contractual or not, considered as commercial under the low 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 which the Convention set forth in the First Schedule applies, and

(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.'

26. Section 44, therefore, in clearest terms states that an Arbitral Award on differences between persons arising out of legal relationship, whether contractual or not considered as commercial under law in force in India, made on or after 11th October, 1960 in pursuance of agreement in writing for arbitration to which the convention set forth in the First Schedule applies and in one of such territories as the Central Government declares to be the territory to which convention applies is a foreign award. Thus, foreign award is an Arbitral Award, It is an Arbitral Award on differences between parties arising out of legal relationship which may be contractual or not but it should be considered as commercial under the law in force in India. It is, therefore, clear that concept of foreign award as defined in Section 44 which appears in Part II cannot be ignored while considering the present controversy. Both sides do not dispute before me that the award is foreign award.

27. Section 45 of the 1996 Act opens with a non obstante clause which overrides what is contained in Part I of the 1996 Act or C.P.C. The moment Judicial Authority when seized of an action in a matter in respect of which parties have made an agreement referred to in Section 44 is approached at the request of one of the referring parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed it should refer the matter to Arbitration under such agreement. In other words, once an agreement referred to in Section 44 is made, it becomes clear that the difference between persons arising out of legal relationship whether contractual or not but considered as commercial under the law in force in India are referred to arbitration in pursuance of an agreement in writing for arbitration to which convention in the First Schedule applies. The resultant award is a foreign award. However, a Judicial Authority can find out whether the agreement to refer matters to arbitration is null and void, in operative or incapable of being performed. The Judicial Authority is a term wider than the term Court and in a given case can be a Court in India as well. The contention before me is that Judicial Authority viz., a Court in India can test the validity and legality of an arbitration agreement referred to in the First Schedule and which may be contained in a contract governed by Indian Law but the resultant award cannot be challenged by parties before a Judicial Authority in India because the award is a foreign award. It being a convention agreement the Court's power is only restricted to examining the legality and validity of the arbitration agreement. Beyond that it is nor permissible for the Court to decide any challenge to the award, it being foreign award. Shri Dave contends that if this power is available to a 'Judicial Authority' it is not possible to accept the objection of maintainability raised by respondent No. 1 to this petition.

26-A. At first blush submissions of Shri Dave appear to have some force. At one stage, I was inclined to going to these aspects because it appears that these were not urged in any of the decisions of this Court brought to my notice by Shri Chinoy. However, for the reasons mentioned hereinbelow it will not be just and proper to go into the same. Shri Dave submits that a situation of conflict may arise in the context of Sections 44 and 45 in as much as the legality, validity and enforceability of an arbitration agreement can be tested on the touchstone of applicability of 1996 Act and other Indian laws but when a foreign award which is made in arbitral proceedings outside India, arising out of an agreement subjected to Indian laws exclusively, then, it will not be open to challenge at all. According to him the legislature has not intended such a conflict. In other words, arbitration agreement and be challenged but not the Arbitral Award. To my mind, this submission overlooks a fundamental aspect namely that legislature has provided only remedy of resistance of enforceability of both under the 1996 Act. It will not be a proper reading of Sections 45 and 48 if a challenge is held to be contemplated by Section 45 qua a arbitration agreement. The Judicial Authority will refuse to enforce the arbitration agreement.

27-A. Shri Dave submits that Section 48 will have to be read together with Sections 44, 45, 46, and 47 as well as other provisions in Part II Chapter I and cannot be read in isolation, Shri Chinoy submits that whichever way one reads it, a foreign award cannot be challenged in India but its enforceability only can be resisted here. In the context of these submission, the matter will have to be examined.

28. In the case of Bhatia International (supra), the Supreme Court was considering as to whether it is permissible for a party to an arbitral proceedings held outside India to apply for interim reliefs under Section 9 of 1996 Act (falling in Part I) against its counter part, which is an Indian party by applying to an Indian Court. Several High Courts held that it is not permissible to do so. The Supreme Court after analysing scheme of the Act and referring to some of .the decisions which were brought to my notice, in paras 23, 26 and 32 has held thus :-

'23. That the legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section (7) of Section 2 reads as follows:- '2(7) An Arbitral Award made under this part shall be considered as a domestic award.'

As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians, and (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India, an international commercial arbitration may be held in a convention country or in a non-convention country. The said Act however, only classifies awards as 'domestic awards' or 'foreign awards.' Mr. Sen admits that provisions of Part II make it clear that 'foreign awards' are only those where the arbitration takes place in a convention country. Awards in arbitration proceedings which take place in a non-convention country are not considered to be 'foreign awards' under the said Act. They would thus not be covered by Part II. An award passed in an arbitration which takes place in India would be a 'domestic award.' There would thus be no need to define an award as a 'domestic award' unless the intention was to cover awards which would otherwise not ne covered by this definition. Strictly speaking, an award passed in an arbitration which takes place in a non-convention country would not be a 'domestic award.' Thus the necessity is to define a 'domestic award' as including all awards made under Part I. The definition indicates that an award made in an international commercial arbitration held in a non-convention country is also considered to be a domestic award.

26. Mr. Sen had submitted that Part II, which deals with enforcement of foreign awards does not contain any provision similar to Section 9 or Section 17. As indicated earlier, Mr. Sen had submitted that this indicated the intention of the legislature not to apply Sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all chapters or parts. 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 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 arbitration under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of 'foreign awards' 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 arbitration not having taken place in India, all or some of the provisions of part I 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 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.'

32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relation thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express of implied, exclude all or any of its provisions. In that case the laws or Rules chases by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.'

29. Shri Dave submits that legal position has undergone a change after this decision. He contends that in view of the decision in Bhatia International's case the judgement of learned Single Judges are no longer good law. He submits that not only this decision but earlier decisions in the case of N.T.P.C. and Sumitomo (supra) make it clear that a foreign award can also be challenged in India. However, the pre condition for this is that substantive contract must be governed by Indian law. In other words, the moment governing law of the underlying contract is an Indian law, the award even if it is a foreign award can be challenged in India. He submits that this aspect has not been noticed in proper perspective by this Court in the three decisions rendered by it. In all these decisions, the aspect of applicability of Indian law to the underlying contract being admitted, yet, a finding is given that a foreign award is not capable of being challenged under Section 34 of 1996 Act. He submits that neither the scheme of the Act nor its abject and purpose has been properly noticed in the three decisions. He submits that it is fundamental to public policy of India that what cannot be enforced must be capable of being challenged. He submits that a foreign award can be challenged when it is sought to be enforced or executed. It must also be permitted to be challenged before such a stage in India if its subject-matter is governed by Indian laws. He submits that if this is not the position, the Supreme Court in the case of Bhatia International would never have permitted an application under Section 9 to be entertained by Indian Court at the instance of a foreign party and that too in an International Commercial Arbitration held outside India. The emphases of Shri Dave is that the decisions of this Court not properly and correctly appreciation as also applying the principles laid down by the Supreme Court, they do not have any binding force and effect.

30. It is not possible for me to accept the contentions of Shri Dave. Firstly, an interpretation and equally a misinterpretation of Supreme Court decision in a judgement of coordinate Court is biding upon me. In the instant case, there is not one but three decisions in the field. The last of the decision is after the judgements of Supreme Court in Bhatia International's case. This Court (Rebello, J.) after noticing the judgement of the Supreme Court and referring to a passage therein observed in para 2 thus :-

'2. At the hearing of the petition, the learned Counsel for the parties have relied on judgements which will be adverted to, to the extent they are necessary in the course of the judgment. In the first instance, it will be necessary to consider the judgment of the Apex Court in Bhatia International (supra) to find out whether it supports the contentions as canvassed before this Court by the learned Counsel for the respondent. At the stage of admission there was another petition also before this Court wherein a foreign award had been challenged under Section 34 of the Arbitration and Conciliation Act, 1996 relying on the judgement in Bhatia International (supra). It was in that context and as it was contended that the judgement in Bhatia requires consideration that this petition as well as other petitions were admitted. To my mind after hearing learned Counsel for the parties and after examining the ratio decidendi of the judgement in Bhatia International (supra), it is not possible to accept the contention advanced on behalf of the respondents that Section 34 would be attracted to challenge a foreign award before this Court. For that purpose, it will be necessary to reproduce, it will be necessary to reproduce the following portion of the judgment in Bhatia International (supra) which will shed light on the matter :-

'The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all chapters or part. 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 Chapter or Part. Part II deals with enforcement of foreign award..........Part II then contains provisions for enforcement of 'foreign awards' 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 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 arbitration not having taken place in India, all or some of the provisions of Part I 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'. From the portion reproduced above, it is clear that the law on the subject may be summarised thus :-

(a) When there are general provisions under the statute unless statute expressly states that they are not to apply then in that event, the general provisions would apply;

(b) When the statute provides special provisions for enforcement it is the special provisions which would apply and not the general provisions. In the instant case there are special provisions for enforcement of foreign awards. Once therefore, there are special provisions for enforcement of foreign awards then the general provisions including provisions for challenge to the award considering the special provision would be excluded. That would mean application of Part II, once that be so, Part I would not apply. Under Part I a decree can be executed only if the challenge under Section 34 fails if made. Under Section 48, the foreign awards become enforceable and is to be executed as a decree.

(c) On the consideration of the law set out in paragraph 28 in so far as application of Section 9 is considered, it holds that Section 9 would not apply in so far as foreign awards are concerned after the award is made.

From the judgment in Bhatia, therefore, these are three major propositions which can be culled out. Once that be the case, the first contention advance on behalf of the respondent opposing enforcement of the foreign award must be rejected.'

With respect, apart from the fact that this decision is binding upon me, in my view, it correctly summarises the legal position after the Supreme Court decision in Bhatia International's case. If the passages in Bhatia's case reproduced by me above are read in the backdrop of Part II of the 1996 Act, the conclusion is inescapable that parties by Agreement, whether express or implied, can exclude applicability of part I of this Act in International Commercial Arbitrations. Therefore, this decision will have to be applied in the light of such agreements and even otherwise its ratio cannot be extended to hold availability of challenge procedure in case of a foreign award. Thus, apart from judicial discipline, the observations and conclusions of Rebello, J., must be followed as they lay down correct law, in my opinion. Thus, the law laid down in Bhatia International's case does not alter the legal position set out in the judgments of Nijjar, J. and Deshmukh, J.

32. Prior to the view of Justice Rebello, even Justice D.K. Deshmukh and Justice Nijjar considered this issue. Justice D.K. Deshmukh after analysing the scheme of the Act in the context of its object and purpose has observed in paras 7, 8, 9 and 10 as under :-

'7. Now if in the light of the rival submissions, the record of the case is perused, it becomes clear that the Agreement between the parties clearly lays down that the place of arbitration shall be London. It also clearly lays down that the Agreement shall be governed by the Laws of India. Therefore, the substantive law that governs contractual relationship between the parties is the Laws of India. The parties to an International Commercial Contract, have freedom to select the law which is to govern the contract. The learned Counsel for the petitioner submits that, in view of Clause 12-4-1 of the contract, the law in force in India is the 'proper law of contract' in the present case. The term proper law of contract' means the system of law by which the parties intended the contract to be governed. The expression 'proper law' refers to the substantive principles of the domestic law of the chosen system. The Supreme Court, in its judgment in the case of National Thermal Power Corporation referred to above, has observed thus:-

'24. 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 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 v. Danvins Ltd.). 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 one of those parties and third party.'

26. 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 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 of the mandatory requirements of the law of the country in which the arbitration is held. If no such choice has been made by the parties, expressly of by necessary implication, the procedural aspect of the conduct of arbitration (as distinguished from the substantive agreement to arbitrate) 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 I.C.C. Rules, those Rules, being in many respects self-procedure, will govern the conduct of the arbitration, except in so far 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 Ker. L.J. in Bank Mellat v. Helliniki Techniki S.A. See also Craig, Park and Paulsoon, International Chamber of Commerce Arbitration, 2nd Edn. (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 the procedural matters concerning the conduct of arbitration. But the overriding principle is that the courts of the country whose substantive laws govern the arbitration agreement are the competent courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised 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 agreement fall within the exclusive competence of the courts of the country whose laws govern the arbitration agreement. (See Mustill and Boyd, Commercial Arbitration, 2nd Edn; alien Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 1986; Russel on Arbitration, 20th Edn. (1982); Cheshire and North's Private International Law, 11th Edn. (1987).

It is clear from the observations quoted above that it is courts of the country whose substantive law govern the arbitration agreement are the competent courts in respect of all matter arising under the Arbitration agreement which will include validity of the Award made by the arbitrators. In the case of National Thermal Power Corporation referred to above, the Supreme Court after considering the provision of the Arbitration Act, 1940 held that, though the award was made at London, it had to be filed in Indian Court, because the 'proper law' was the laws in force in India . Now the Arbitration Act 1940 has been repealed. In the present case also, the 'proper law' is the laws in force in India and the award has been made in London. The present petition has been filed under Section 34 of the Act challenging the award. The question, therefore, that falls for consideration is whether, the award, which has been made at London, can be challenged by filing an application under Section 34 of the Act. Sub-section (2} of Section 2, which is relevant for considering the question, reads as under:-

'2(2) This part shall apply where the place of arbitration is in India'.8. As observed above, the present petition has been filed by the petitioner under the provisions of Section 34 of the Arbitration Act.

Perusal of the Scheme of the Arbitration Act shows that, Part I of the Arbitration Act is divided into 10 chapters Sections 2 to 6 are to be found in Chapter I; Sections 7 to 9 are to be found in Chapter II; Sections 10 to 15 are to be found in Chapter III; Section 20 is to be found in Chapter V and Section 34 is to be found in Chapter II. Thus, Section 34 is to be found in Part I of the Arbitration Act. Sub-section (7) of Section 2 lays down that 'an Arbitral Award made under this part shall be considered as a domestic award'. It is clear that if the place of arbitration is in India, the process of making an award is governed by the provisions of Part I of the Arbitration Act irrespective of the agreement between the parties in that regard. Section 31 lays down the manner in which the Arbitral Award is to be made and thereafter, Section 34 vests power in the Court to set aside the Arbitral Award. It is thus clear that an application can be made under Section 34 for setting aside an Arbitral Award which is a domestic award made in accordance with the provisions of Part I. The scheme of Arbitration Act appears to be to make the remedy for challenging an Arbitral Award provided by Section 34 available only against a domestic award made under the provisions of Part I of the Arbitration Act. It is not in dispute before me that the award which is challenged in the present petition is not a domestic award. In fact, Mr. Tulzapurkar, learned Counsel, appearing for the petitioner categorically stated that the award which is challenged in the present petition is a foreign award. In so far as the challenge to a foreign award is concerned, the scheme of the Act appears to be that the remedy that is available to a person against whom that award has been made is to wait till the person in whose favour the award is made moves under Section 48 of the Act for enforcement of the award and it is then that such a person can challenge the validity of the award on the grounds which are mentioned in Section 48 of the Act.

9. The submission of the learned Counsel for the petitioner is that because the proper law of contract in the present case is the substantive law in force in India, the Arbitration Act 1996, specially Section 34 thereof is a part of substantive law in force in India therefore he is entitled to challenge the validity of the Award by filing an application under Section 34 of the Act. It is no doubt true that as per the law laid down by the Supreme Court in its judgment in the case of National Thermal Power Corporation, the petitioner can challenge the validity of the award under the substantive law in force in India. Perusal of the provisions of Section 48(1)(e) and Section 48(3) of the Act, shows that, the Act contemplates the possibility of a foreign award which is sought to be enforced under Section 48 of the Act being challenged before a competent authority of the country under the law of which that award was made. It is obvious, that such an award can be challenged under the substantive law in force in India. However, whether, there is a substantive law in force in India which permits or provides for challenge to such an award is another question. It is clear, that, the petitioner would be able to challenge the award under the substantive law in force in India, provided, the substantive law in force in India provides for such a challenge. The question, whether such a law is in force in India or not or under which law in force in India, the petitioner can challenge the ward is neither raised nor does it fall for consideration before me in the present petition. The only question debated before me is whether such a challenge is possible by filing an application under Section 34 of the Act. I have already observed above that considering the scheme of Part I of the Act, such a challenge is not possible in an application filed under Section 34 of the Act.

10. The learned Counsel for the petitioner submits, as literal construction of the provisions of Section 2(2) of the Act, leads to the conclusion that, the petitioner is rendered without a remedy to challenge the validity of the Award, the provisions of Section 2(2) of the Act, should be so construed, as to mean that only for application of procedural provision of Part I holding of the arbitration in India is necessary and not the substantive provision of Part I. It is submitted, that the provision of Section 2(2) of the Act should be construed to be only inclusive, in the sense that, it makes the provisions of Part I of the Act applicable to the Arbitration which is held in India but does not exclude their application to the arbitrations held outside India. It is clear, that according to the petitioner, the need to place such a construction on the provision of Section 2(2) of the Act arises because otherwise the petitioner is denied the remedy of challenging the Award. The submission, that the petitioner is left with no remedy to challenge the Award, in my opinion, is not well founded. The learned Counsel for the petitioner, as observed above, has himself stated that the award which is challenged in this petition is a foreign award. The Supreme Court in its judgment in the case of Sumitomo Heavy Industries Ltd.. referred to above, has observed thus 'the need to file an award in Court arises only if it is required to be enforced, and to the need to challenge it arises only if it is being enforced.' It is thus clear that the need of the petitioner to challenge the award would arise in case the respondent No. 1 takes steps to enforce the award. In case, the respondent No. 1 decides to enforce the award in India, it will have to make an application under Section 48 of the Act, and in that event, the petitioner can appear before the Court and request Court to refuse to enforce the Award against it. Section 48 of the Act reads as under :-

It is clear that the parry, against whom the award is sought to be enforced can resist the enforcement of the award on one or more of the grounds set out in Section 48 of the Act. The grounds on which a party can challenge an award are detailed in Section 34(2) of the Act.

A comparison of the provision of Section 48 and Section 34 of the Act quoted above shows that the grounds on which a domestic award can be challenged as also the grounds on which a party can resist enforcement of a foreign award are identical. Thus, as and when enforcement of the award is sought against the petitioner, it can resist the enforcement of the award on the same grounds on which it could have challenged the award under Section 34 of the Act. Therefore, it cannot be said that the petitioner has no remedy of challenging the award. It is a settled principle of law that in construing statutes one has to adhere to the ordinary meaning of the words used and to the grammatical construction unless that is at variance with the intention of the legislature to be collected from the scheme of the statute itself or leads to any manifest absurdity or repugnancy. It appears from the reading of the Act that in so far as the challenge and enforceability is concerned, there are different schemes for a domestic award and a foreign award. The Act provides for a direct challenge to a domestic award (Section 34). A domestic award is, enforceable as a decree passed by a Civil Court, after the period provided for challenging the same is over, and in case it is challenged, after the challenge fails (Section 36). Whereas in so far as the foreign award is concerned, it is not enforceable in India unless the Court finds that it is enforceable. For that purpose, the party which seeks its enforcement has to make an application to the Court, and has to satisfy the Court about its enforceability (Section 49). It is only after the party satisfies the Court that a foreign award becomes enforceable as a decree passed by a Civil Court (Section 49). The Act provides different remedies to persons, against whom domestic award is made and person against whom foreign award is made. A person against whom a domestic award is made, has to immediately approach the Court for challenging the same by making an application under Section 34 of the Act otherwise the person in whose favour the award has been made can execute the same as a decree. On the other hand, a person against whom a foreign award has been made, is not required to challenge the same, because it cannot be executed against him in India unless the Court finds that it is enforceable. He can wait till the person in whose favour the foreign award has been made, makes an application before the Court (Section 47), Rule 803-E of Rules framed by this Court, provides for a notice to be issued to the person who is likely to be adversely affected by the proceeding. After receiving the notice from the Court he can appear before the Court, and submit his defence and desist the enforcement of the foreign award against him. He can request the Court not to enforce the award and in case he succeeds in satisfying the Court on or more of the grounds mentioned in Section 48 of the Act, the Court has to refuse to enforce the award. As observed above, comparison of the provision of Section 34 and Section 48 of the Act shows that a person against whom a foreign award has been made can resist the enforcement of the foreign award against him on the same ground on which he could have, had it been provided, challenged the validity of the award under Section 34 of the Act. In other words, the grounds on which a domestic award can be challenged and the grounds on which the enforcement of a foreign award can be resisted are identical. Thus, though the scheme of the Act provides different kind of remedies to the persons aggrieved by a domestic award and a person aggrieved by a foreign award, both the remedies are equally efficacious and adequate, it cannot be said that the Act does not provide an effective remedy to a person who is aggrieved by a foreign award. Hence, there is, in my opinion, no need to construe the provision of Section 2(2) of the Act in any other manner.'

33. With respect, this enunciation is in tune with the legislative mandate and I am in agreement with it. Similar are the observations of Justice Nijjar, to which my attention has been invited by Shri Chinoy. Judicial discipline and principles of certainty require that co-ordinate benches ought not to differ with each other, merely because a different argument or another interpretation of law is placed before. Exception to this could only be if the decisions are per incuriam. The binding effect of a decision of co-ordinate Court is not lost merely because it did not consider or did not notice any aspect or principle of law unless it could be demonstrated that the decision is rendered per incuriam. Per incuriam is ignorance of a statutory provision or a binding decision interpreting the same of a higher Court.

34. It is pertinent to note that submission of Shri Dave is that these decisions have not properly appreciated the law laid down by the Supreme Court in N.T.P.C., Sumitomo and Bhatia International and thus have failed to apply the same to the facts before them. It is not permissible for me to accept this submission of Shri Dave in the context of what is observed hereinabove. In the case of Panjumal Hassomal Advani v. Harpal Singh Abnashi Singh Sawhney, reported in : AIR1975Bom120 a Division Bench of this Court had the following to say about law of precedents in para 11 :

11. Now, it is well settled that normally one Division Bench of a High Court cannot take a view contrary to the decision given by another Bench of that Court. Shri Venkateshwara Rice, Gining and Groundnut Oil Mill Contractor Co. etc. v. State of Andhra Pradesh : [1972]1SCR346 , it has been observed that the later Bench before whom a question arises is bound by the earlier decision. Mr. Kripalani on behalf of the petitioner also drew our attention in this connection to Young v. Bristol Aeroplane Company Ltd. 1944(1) K.B. 718, where the following propositions have been set out in the head note:

'The Court of Appeal is bound to follow its own decisions and those of courts of co-ordinate jurisdiction and the 'full' Court is in the same position in this respect as a division of the Court consisting of three members. The only exceptions to this rule are :-

(1) The Court is entitled and bound to decide which of two conflicting decisions of its own it will follow:

(2) the Court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot, in its opinion, stand with a decision of the House of Lords;

(3) the Court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam, e.g. where a statute or a Rule having statutory effect which would have affected the decision was not brought to the attention of the earlier Court.'

Now, in the matter before us it is not possible to say that the decision of the Division Bench in Kalaviti's case, C.A. No. 1699 of 1969, dt. 26-4-1973 (Bom.) can be considered as given per incuriam. This was very fairly conceded by Mr. Nain. A decision cannot be treated as given per incuriam merely because the Court had not the benefit of a full and exhaustive argument and as a general rule the only cases in which decisions should be held to be given as per incuriam are those given in ignorance of some inconsistent statutory provision or binding authorities. In the matter before us, it cannot be said that the Division Bench in Kalavati's case C.A. No. 1699 of 1969, dt. 26-4-1973 (Bom.) has given its decision either in ignorance of the provisions of any statute or binding authorities i.e. the judgment of the Supreme Court. It was however, contended that the Division Bench in Kalavati's case C.A. No. 1699 of 1969, dt. 26-4-1973 (Bom.) had wrongly understood, Sabharwal Brothers v. Guna Amrit Thadani : [1973]1SCR53 and thereby erroneously came to the conclusion that the decision in Satpalsingh Arora's case : (1971)73BOMLR777 which was binding, being a decision of a Division Bench of the Bombay High Court, was no longer good law. But then, it is equally well settled that an interpretation (and equally a misinterpretation) of a binding decision of the Supreme Court will itself be binding subsequently on co-ordinate courts and must be got corrected by a higher Court, and no co-ordinate Court on that ground may refuse to follow an earlier decision, opining that in its view the said earlier decision had wrongly understood or improperly applies a decision of a higher Court. The proposition of law as to be found in Halsbury's Laws of England (third edition) Volume 22, at page 800 reads as follows : - 'Even if a decision of the Court of Appeal has misinterpreted a previous decision of the House of Lords, the Court of Appeal must follow its previous decision and leave the House of Lords to rectify the mistake.' Following this, in our opinion the same salutary principle must be adopted and applied here, Both as to the true ratio of Deocan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain, : [1969]1SCR887 and the effect of Sabharwal case : [1973]1SCR53 , we must follow and apply what has been laid down by a co-ordinate Court viz., the Division Bench which decided Kalavati's case. C.A. No. 1699 of 1969, dt. 26-4-1973 (Bom.) and any aggrieved party must be referred to the Supreme Court for the correction of errors (or what it contends are the errors) in the earlier decision.'

Reference can usefully be made to a Constitution Bench decision of the Supreme Court reported in Ambika Prasad Mishra v. State of U.P. : [1980]3SCR1159 where it has observed thus:

'..... Every new discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent, In this view, other submissions sparkling with creative ingenuity and presented with high pressure advocacy cannot persuade us to reopen what was laid down for the guidance of the nation as a solemn proposition by the epic fundamental rights case....'

'... It is wise to remember that fatal flaws silence by earlier rulings cannot survive after death because a decision does not lose its authority merely because it was badly argued, inadequately considered and fallaciously reasoned' (Salmond 'Jurisprudence' p. 215 (11th Edition).'

35. Shri Dave contends that despite this decision, in a recent decision of the Supreme Court it is held that if a different argument is canvassed, then it is permissible for a Single Judge to differ with another Single Judge or a Division Bench to differ with another Division Bench. To my mind, that is not a proper reading of the Supreme Court decision. In the case of Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court, reported in : (1990)IILLJ70SC reliance on which is placed by Shri Dave, the Supreme Court in para 44 has observed thus:

'44. An analysis of judicial precedent, ratio decidendi and the ambit of earlier ad later decisions is to be found in the House of Lords' decision in F.A. & A.B. Ltd. v. Lupton (Inspector of Taxes) Lord Simon concerned with the decisions in Griffiths v. J.P. Harison Watford Ltd. and Finsbury Securities Ltd. v. Inland Revenue Commissioner with their interrelationship and with the question whether Lupton case fell within the precedent established by the one or the other case, said (A.C. p. 658) :-

'.....What constitutes binding precedent is the ratio decidendi of a case, and this is almost always to be ascertained by an analysis of the material facts of the case-that is, generally, those facts which the Tribunal whose decision is in question itself holds, expressly or implicitly, to be material.'Similarly in the case of Fuzlaunbi v. K. Khader Vali and Anr., reported in : 1980CriLJ1249 , the Supreme Court has held:-'We need not labour the point because this Court has already interpreted Section 127(3)(b) in Bai Tahira and no Judge in India, except a larger Bench of the Supreme Court without a departure from judicial discipline can whittle down, wish away or be unbound by the ratio thereof. The language used is unmistakable, the logic at play is irresistible, the conclusion reached is inescapable, the application of the law as expounded there is an easy task. And yet, the Division Bench, if we may with respect say so, has, by the fine art of skirting the real reasoning laid down 'unlaw' in the face of the law in Bai Tahir which is hardly a service and surely a mischief, unintended by the Court may be, but embarrassing to the subordinate judiciary.'

This decision is clearly distinguishable. There, a Division Bench of a High Court misinterpreted a binding judgment of the Supreme Court. The Supreme Court found that the Division Bench was in error in doing so because the Supreme Court decision was squarely applicable to the facts of the case before the Division Bench. Such is not the case here. In fact the situation before me is identical when the Supreme Court sounded a note of caution as early as in Mahadeolal Kanodia v. Administrator General of West Bengal, : [1960]3SCR578 observing thus : -

'19. Before we part with this appeal, however, it is our duty to refer to one incidental matter. We have noticed with some regret that when the earlier decision of two Judges of the same High Court in Deorajin Debi v. Satyadhyan Ghosal : AIR1954Cal119 , was cited before the learned judges who heard the present appeal they took on themselves to say that the previous decision was wrong, instead of following the usual procedure in case of difference of opinion with an earlier decision, of referring the question to a larger Bench. Judicial decorum no less than legal property forms the basis of judicial procedure. If one thing is more necessary in law than any other thing, it is the quality of certainty, That quality would totally disappear if Judges of co-ordinate jurisdiction in a High Court start overruling one another's decisions. If one Division Bench of High Court is unable to distinguish a previous decision of another Division Bench, and holding the view that the earlier decision is wrong, itself given effect to that view the result would be utter confusion. The position would be equally bad where a Judge sitting singly in the High Court is of opinion that the previous decision of another single Judge on a question of law is wrong and given effect to that view instead of referring the matter to a larger Bench. In such a case lawyers would not know-how to advise their clients and all courts subordinate to the High Court would find themselves in an embarrassing position of having to choose between dissentient judgments of their own High Court.'

36. Hence I conclude that the decisions of this Court (Deshniukh, J. & Rebello, J.) are binding on me. That apart, for reasons set out above, I respectfully concur with the same. It is also brought to my notice that letters patent appeals are pending against these judgments. However, they are not set aside and hence continue to hold the field. In these decisions, identical objections have been upheld. Therefore, I am bound by them. After holding that I am bound by them, naturally, I have to hold that present petition filed under Section 34 of the 1996 Act challenging a foreign award is not maintainable.

37. Considering the conclusion reached by me, it is not necessary to decide the wider issue posed for my consideration by Shri Chinoy. The propositions in that behalf are culled out by me above. Shri Chinoy contends that the cases where the arbitration has one governing law, the underlying contract has another and the procedural law of a third country is applied, are held to be very rare and once in blue moon situations. Reliance in that behalf is placed on the decision of Supreme Court in the case of O.N. G. C.' (supra) : [1987]1SCR1024 . However, I need not decide this issue in the facts and circumstances of the present case. I leave it open for decision in an appropriate case. More so, then in the case before me it is not disputed that although Indian law governs underlying contract, the law of arbitration and the procedural law is Swiss law. Hence, a challenge to the Arbitral Award dated 21st October 2003 can only be raised in terms of Section 48(1)(e) in Switzerland.

38. Therefore, leaving the aforesaid wider question open for decision in an appropriate case, I pass the following order :-

a) Petition is dismissed as not maintainable. In view thereof, this Court can- not go into merits of the case in the light of the grounds raised in the petition.

b) In view of dismissal of the main petition on the ground of maintainability Notices of Motion No. 933 of 2004 and 732 of 2004 do not survive and the same are disposed of accordingly.

c) All interim orders to stand vacated.

Mr. Niranjan Pandit, learned Counsel appearing for petitioners applies for continuation of interim orders in the above Notices of Motion for a period of four weeks from today to enable petitioners to take out appropriate proceedings to challenge this order. Learned Counsel appearing for respondent No. 1 opposes this request. In my view, considering that interim order in the Notices of Motion was passed on 5th March, 2004 in the interest of justice, the said order should continue for a period of two weeks. Certified copy expedited.