“REPORTABLE”

IN THE SUPREME COURT OF INDIA

(ORDINARY ORIGINAL CIVIL JURISDICTION)

ARBITRATION APPLICATION NO. 8 OF 2008

Citation Infowares Limited ….Applicant

Versus

Equinox Corporation  ….Respondent

J U D G M E N T

V.S. SIRPURKAR,J.

1. This is  an application under Section 11 (5)  of  the Arbitration and  

Conciliation  Act,  1996.   The  applicant  M/s  Citation  Infowares  Ltd.  is  a  

company  registered  under  the  Companies  Act  carrying  on  business  in  

United  States  of  America  as  also  in  Gurgaon,  India  through  its  

establishment/subsidiary.  The respondent Equinox Corporation is also a  

company  registered  within  the  appropriate  laws  of  United  States  of  

America, having its office at 10, Corporate Park, Suit No.130, Irvine, CA-

92606, USA.  The Equinox Corporation has been carrying on business in  

India through outsourcing.  It is also carrying on business in India through  

its own establishment in  India,  Equinox Global  Services Private Limited  

(hereinafter called ‘EGSPL’).   The said EGSPL is a company registered  

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under the Companies Act and has its office in Gurgaon.  It is pleaded in  

the  application  that  the  respondent  company  Equinox  Corporation  

(hereinafter called ‘EC’) had entered into an outsourcing agreement singed  

in  Kolkata,  India  with  the  applicant  Citation  Infowares  Ltd  (hereinafter  

called  ‘CIL’)  on  09.02.2004  wherein  the  applicant  was  engaged  as  a  

service provider on terms and conditions contained in the agreement.  It  

was  agreed  in  this  agreement  dated  09.02.2004  that  CIL  which  had  

bagged orders from its client and since it had sufficient funds, space and  

existing infrastructure to execute the projects and since it required expert  

manpower  to  provide  service  to  its  client  and  further  since  CIL  had  

approached EC for providing the required number of resources to CIL as  

against  the monthly  charges at  mutually  agreed consideration,  EC had  

agreed to provide resources and, hence, both the parties had, in short,  

mutually agreed to do the business on certain agreed terms.  The terms  

included that  the duration of  the agreement  was  to be for  three years.  

There was a confidentiality clause 10.  Following was the clause 10:

“10. Any dispute between the parties hereto to arising  from  this  Agreement,  or  from  an  individual  agreement concluded on the basis thereof, shall  be finally referred to a mutually agreed Arbitrator.”

2. Two more agreements  were  entered into,  they being agreements  

dated 23.07.2004 and 25.01.2007 in between the parties.  It is the claim of  

the  applicant  that  it  created  infrastructure  for  seating  capacity  of  200  

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customized seats at Gurgaon address of the respondents and same were  

being utilized by the respondent.  All the three agreements were signed at  

Kolkata, India and the services were being provided and rendered under  

the said agreement by the applicant at Gurgaon, India.

3. On this backdrop, by a notice dated 09.01.2008 sent through e-mail,  

the  respondent  terminated  the  agreements  dated  25.01.2007  w.e.f.  

07.03.2008.  According to the applicant, this termination of agreement was  

illegal  and wrongful,  causing it  huge loss.   The applicant  assessed the  

damages  to  be  compensated  by  the  respondent  tentatively  at  US  $  

23,49,182.   The applicant also pleads that the respondent had also failed  

to pay the outstanding amount of US $ 6,32,182 payable to the applicant  

under the contract against the invoice raised by the applicant for the period  

from July,  2007 to  January,  2008.   The applicant  also claimed on this  

amount the interest @ 18 % per annum.   

4. What  is  important  is  the  agreement  dated  25.01.2007  which  has  

already been referred to.  Under the said agreement clause 10.1 provided  

as under:

“10.1 Governing  law  -   This  agreement  shall  be  governed by and interpreted in accordance with  the  laws  of  California,  USA  and  matters  of  dispute,  if  any,  relating to  this  agreement  or  its  subject matter shall be referred for arbitration to a  mutually agreed Arbitrator”

5. Thus,  in  between,  first  agreement  dated  09.02.2004  and  the  

subsequent agreement dated 25.01.2007 there was an essential difference  

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that  under  the  last  agreement  the  governing  law  was  to  be  that  of  

California, USA.  However, that clause did provide for arbitration in case of  

disputes.  On the disputes arisen, the applicant invoked arbitration clause  

by  its  notice  dated  08.02.2008  and  further  notice  dated  09.02.2008  

informing the respondent about appointment of Arbitrator and requested  

the respondent to agree to the said appointment.  The respondent did not  

agree  within  the  period  of  30  days  provided  in  Section  11(5)  of  the  

Arbitration  and Conciliation Act,  1996 (hereinafter  called the ‘Arbitration  

Act’)  and, thus, parties have failed to agree to the appointment  of  sole  

Arbitrator within the time limit prescribed under that Section necessitating  

the present application for appointment of an Arbitrator by this Court since  

this happens to be an international arbitration.

6. There is no dispute between the parties that this is an international  

arbitration and, therefore, under the Arbitration Act, the Chief Justice or his  

nominee alone would have the jurisdiction to appoint the Arbitrator.  There  

is also no dispute that there is a live dispute between the parties and there  

is an Arbitration Clause in case of dispute between the parties.

7. So far so good.  However, the question that has arisen is whether  

this Court would have the jurisdiction, in the present factual scenario and  

on the backdrop of the fact that the parties vide the aforementioned clause  

10.1 had agreed that the governing law would be that of California, USA.  

According  to  the  applicant,  it  is  only  this  Court  which  would  have  the  

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jurisdiction to appoint the Arbitrator, while according to the respondent this  

Court  does  not  have  the  jurisdiction  to  appoint  the  Arbitrator  as  the  

provisions of the Arbitration Act would necessarily stand excluded in view  

of  the  specific  language  of  clause  10.1  of  the  agreement  wherein  the  

governing law would be the law of California, USA.   

8. Both  the  sides  have extensively  canvassed the  rival  contentions.  

Shri  S.K.  Bagaria,  Learned Senior  Counsel  appearing  on  behalf  of  the  

applicant contended that this question is no more res integra and stands  

concluded by the judgment  of  this  Court  in  Indtel  Technical  Services  

Private Ltd. Vs. W.S. Atkins Rail Limited reported in 2008(10) SCC 308.  

He further pointed out that the said judgment exclusively place reliance on  

other judgment of  this Court in  Bhatia International Vs. Bulk Trading  

S.A.  reported in  2002 (4) SCC 105.   The Learned Senior Counsel also  

made a reference to another judgment in  Venture Global Engineering  

Vs. Satyam Computer Services Ltd.  reported in  2008(4) SCC 190.  It  

was pointed out that in the first mentioned decision, the Learned Single  

Judge  (Hon’ble  Altamas  Kabir,  J.)  of  this  Court,  while  interpreting  the  

clause  identically  worded  as  Clause  10.1  (quoted  supra),  came to  the  

conclusion and recorded his findings in para 36 and 37 of that judgment  

and  ultimately  held  that  the  provisions  of  Part  I  of  Arbitration  and  

Conciliation  Act,  1996  would  be  equally  applicable  to  international  

commercial arbitrations held outside India unless any of the said provisions  

are  excluded  by  agreement  between  the  parties  expressly  or  by  

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implication.   The  Learned  Judge  also  found  that  this  question  of  the  

applicability of the Part I of Arbitration and Conciliation Act, 1996 to the  

international  agreements,  even  where  the  governing  law  was  to  be  a  

foreign law, was concluded by the decision in  Bhatia International Vs.  

Bulk Trading S.A. reported in 2002 (4) SCC 105 (cited supra).

9. As against this, Shri Krishnan Venugopal, Learned Senior Counsel  

appearing  on behalf  of  the respondent  urged from the language of  the  

clause that where the governing law is agreed between the parties, say  

foreign law, then essentially, the question of appointment of arbitrator also  

falls  in  the  realm  of  the  said  foreign  law  and  not  within  the  realm  of  

Arbitration  and  Conciliation  Act.   The  Learned  Senior  Counsel  further  

urged that in the wake of language of Clause 10.1, it was very clear that  

the agreement was to be governed by and interpreted in accordance with  

the Laws of California and further in continuation of the earlier words, it  

was provided that the matters of dispute relating to the agreement or its  

subject  matter,  would  be  referred  to  arbitration  to  a  mutually  agreed  

arbitrator.  The Learned Senior Counsel, therefore, urged that considering  

the positive language of  Clause 10.1,  it  was  clear  that  the parties had  

specifically agreed that the matter of appointment of arbitrator would also  

be  governed  by  the  Laws  of  California.   The  Learned  Senior  Counsel  

urged that, therefore, there was a clear cut agreement between the parties  

to  that  effect  and  as  such,  as  held  in  Bhatia  International  Vs.  Bulk  

Trading S.A.  reported in  2002 (4) SCC 105 (cited supra),  parties had  

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expressly  excluded  the  provisions  of  Part  I  of  the  Arbitration  and  

Conciliation Act, 1996.  The Learned Senior Counsel very heavily relied on  

the last part of Para 32 of the judgment in case of  Bhatia International  

(cited  supra).   The  learned  Senior  Counsel,  therefore,  urged  that  even  if  

judgment in case of Bhatia International (cited supra) was held applicable,  

it  was in fact, liable to be read in favour of the respondent and not the  

applicant.   The  Learned  Senior  Counsel  also  invited  our  attention  to  

another judgment of this Court in  National Thermal Power Corporation  

Vs.  Singer  Company  &  Anr.  reported  in  1992  (3)  SCC  551 and  

Sumitomo  Heavy  Industries  Limited  Vs.  ONGC  Limited  reported  in  

1998(1)  SCC  305.   Apart  from  these  judgments,  the  Learned  Senior  

Counsel  relied on a decision of  the House of  Lords in  case of  James  

Miller  & Partners Ltd.  Vs. Whitworth Street Estates Ltd. reported in  

1970 AC 583  in support  of  the proposition that where the parties have  

agreed  that  the  governing  law  would  be  a  foreign  law,  normally  the  

question  relating  to  Arbitral  Tribunal  would  also  be  governed  by  such  

foreign law.  The other decision relied upon by the Learned Senior Counsel  

is the decision of Privy Council in Bay Hotel and Resort ltd. Vs. Cavalier  

Construction Co. Ltd.  reported in 2001 UKPC 34/2001 WL 825663 and  

the  decision  of  Queen’s  Bench  (Commercial  Court)  in  case  of  ABB  

Lummus Global Ltd. Vs. Keppel Fels Ltd.  reported in  1999(2) Lloyds  

Law Report 24.  The Learned Senior Counsel also painstakingly took us  

through  the  provision  of  California  Code  of  Civil  Procedure  and  more  

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particularly, in Chapter II and III thereof.  Judgments of Bombay High Court  

and Gujarat High Court were also relied upon.   

10. On these conflicting claims, it is to be found as to whether it would  

be  for  this  Court  to  appoint  the  arbitrator  under  Section  11(5)  of  the  

Arbitration and Conciliation Act, 1996.

11. There can be no dispute that such appointment can be made by this  

Court  only  and  only  if  Part  I  of  the  Arbitration  and  Conciliation  Act  is  

applicable to the present arbitration proceedings.

12. Shri  Bagaria,  learned  senior  counsel  appearing  on  behalf  of  the  

petitioner  heavily  relied  on  the  Bhatia  International  (cited  supra) and  

pointed out that the law on this subject is no more res integra as it was concluded  

by the  judgment  of  this  Court  in  Indtel  Technical  Services’  case (cited  

supra)   Learned  counsel  pointed  out  that  in  the  said  judgment  of  Indtel  

Technical Services’ case (cited supra),  the earlier  judgments in  Bhatia  

International  (cited  supra) and  even  National  Thermal  Power  

Corporation’  case (cited supra)  have  been considered.   Learned  counsel  

pointed  out  that  the  clause  of  arbitration  which  fell  for  consideration  was  as  

follows:

“Although the matter has been argued at great length and Mr.  Tripathi has tried to establish that the decision of this Court in  Bhatia International’s Case is not relevant for a decision in  this case, I am unable to accept such contention in the facts  and circumstances of the present case.  It is no doubt true  that it is fairly well settled that when an arbitration agreement  is  silent  as  to  the  law  and  procedure  to  be  followed  in  implementing  the  arbitration  agreement,  the  law governing  the said agreement would ordinarily be the same as the law  

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governing  the  contract  itself.   The  decisions  cited  by  Mr.  Tripathi  and the views of  the jurists  referred to  in  NTPC’s  case  support  such  a  proposition.   What,  however,  distinguishes  the  various  decisions  and  views  of  the  authorities in this case is he fact that in    Bhatia International    this Court laid down the proposition that notwithstanding the  provisions of Section 2(2) of the Arbitration and Conciliation  Act, 1996 indicating that Part I of the said Act would apply  where the place of arbitration is in India, even in respect of  international  commercial  agreements,  which  are  to  be  governed by the laws of another country, the parties would  be entitled to invoke the provisions of Part I of the aforesaid  Act and consequently the application made under Section 11  thereof would be maintainable.      

(emphasis supplied)

13. Again in paragraph 37 the Court  expressed that the decision in Bhatia  

International’s case has been rendered by a Bench of three Judges and governs  

the scope of application under Section 11, thereby expressing the binding nature  

of the judgment.  It was specifically held that unless language of the provisions of  

Part  I  are excluded by agreement  between the parties either expressly or  by  

implication, Part I of the Act including Section 11 would be applicable even where  

the international commercial agreements are governed by the clause of another  

country.   It  is not,  therefore, necessary to consider the argument of Shri K.K.  

Venugopal,  learned  Senior  counsel  to  the  effect  that  the  law  laid  down  in  

National Thermal Power Corporation’s case (cited supra) .would govern  

the field.  Even otherwise it is difficult  to accept the contention that  National  

Thermal Power Corporation’s case (cited supra) can clinch the issue.   

14. In paragraph 23 thereof the Court undoubtedly expressed that the proper  

law of arbitration is normally the same as the proper law of contract and it is only  

in exceptional cases that it is not so, even where the proper law of contract is  

expressly  chosen  by  the  parties.   The  Court  further  expressed  about  the  

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presumption arising that the law of the country where arbitration is agreed to be  

held is the proper law of arbitration.  This presumption was heavily relied on by  

Shri K.K. Venugopal.  In my opinion the scope of the expressions in paragraph  

23 must be held to be limited.  There may be presumption where the parties have  

agreed  to  hold  arbitration  in  a  particular  country.   In  that  circumstance,  the  

presumption  would  arise  that  the  law of  the  country  where  the  arbitration  is  

agreed to be held would apply as a law of contract.  Where there has been no  

specific expression about the law of contract, the situation is otherwise.  In this  

way the law of contract is agreed upon as the Californian law.   

15. However,  there  is  no  agreement  in  respect  of  the  law  governing  the  

procedure of arbitration.  Again in paragraph 25 the Court expressed that the  

party had the freedom to choose the law governing international agreement of  

choosing substantive law of arbitration agreement as well as the procedural law  

governing the conduct of the arbitration.  It is then the choice to be exercised by  

the parties or by implication, except to such situations where there is no express  

choice of the law governing the contract as a whole or the arbitration agreement  

in particular.  There is, in absence of any contrary intention, a presumption that  

the parties  have intended that  the proper  law of  contract  as well  as the law  

governing arbitration agreement are the same as the law of the country in which  

the arbitration is agreed to be held.  Here again the stress is on the agreement  

about the country where the arbitration is agreed to be held and precisely this  

situation is absent in the present case.  Here the substantive law of contract  

governing the contract is specifically agreed upon.  However, the place where  

arbitration  would  be held  is  not  to  be found in  the language of  Clause 10.1.  

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Therefore,  the  situation  in  National  Thermal Power Corporation’s case  

(cited supra) was not applicable to the present case.   

16. The Court undoubtedly further goes on to say that where the proper law of  

contract is expressly chosen by the parties such a law must, in the absence of  

unmistakable intention to the contrary, govern the arbitration agreement which,  

though  collateral  or  ancillary  to  the  contract,  is  nevertheless  a  part  of  the  

contract.  It is this expression which has been heavily relied upon by the learned  

senior counsel for the respondent.   

17. However,  in  Bhatia International  (cited supra),  duly  considered  in  

Indtel Technical Services’ case (cited supra)   is apart from the fact that  

the provisions of the Arbitration and Conciliation Act, 1996 were not applicable  

either in Singer’s case or even in Sumitomo Heavy Industries’ case (cited  

supra).  The  issue  regarding  the  applicability  of  Part  I  of  the  1996  Act  to  

international  commercial  arbitration also did not fall  for  consideration in these  

cases.  It may be that the Arbitrator might be required to take into account the  

applicable  laws  which  may  be  the  foreign  laws  but  that  does  not  effect  the  

jurisdiction under Section 11 which falls for Part I which has been specifically  

held applicable in Bhatia International (cited supra).     

18. The  learned  Judge,  deciding  the  Indtel  Technical  Services’  case  

(cited supra) also has taken into consideration this aspect and has expressed  

in Paragraph 36 as follows:

“The decisions cited by Mr. Tripathi and the views of  the  jurists  referred  to  in  NTPC’s case  support  such  a  proposition.   What,  however,  distinguishes  the  various  decisions and views of the authorities in this case is he fact  

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that  in  Bhatia  International this  Court  laid  down  the  proposition  that  notwithstanding  the  provisions  of  Section  2(2) of the Arbitration and Conciliation Act, 1996 indicating  that Part I of the said Act would apply where the place of  arbitration  is  in  India,  even  in  respect  of  international  commercial agreements, which are to be governed by the  laws  of  another  country,  the  parties  would  be  entitled  to  invoke  the  provisions  of  Part  I  of  the  aforesaid  Act  and  consequently the application made under Section 11 thereof  would be maintainable.”

19. The  situation  therefore  is  identical  in  the  present  matter.   Shri  K.K.  

Venugopal,  however, contended that if  the parties intended specifically in this  

case that the law governing the contract was Californian law, as expressed in  

Bhatia  Internation  as  well  as  in  Indtel  Technical  Services’  case  (cited  

supra), an implied exclusion of Part I should be presumed.  I am afraid it is not  

possible to read such an implied exclusion.

20. Seen the striking similarity between Clause 10.1 and Clauses 13.1 and  

13.2 which have been quoted above and further the view expressed by learned  

Judge  in  Indtel  Technical  Services’  case  (cited  supra) regarding  the  

exclusion, it is only possible to read even distantly such an implied exclusion of  

Part I.  It  cannot be forgotten that one of the contracting parties is the Indian  

party.  The obligations under the contract were to be completed in India.  Further  

considering  the  nature  of  the contract,  it  is  difficult  to  read any such implied  

exclusion of Part I in the language of Clause 10.1.  That argument of learned  

senior counsel for the respondent therefore must be rejected.   

21. Learned senior counsel for the respondent invited attention of this Court to  

paragraphs  32  and  34  of  Bhatia  International  (cited  supra) and  again  

reiterated that the implied exclusion must be read in the language of Clause 10.1.  

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I have already however, held that considering the various factors, such exclusion  

cannot be read and, therefore, Bhatia International (cited supra)  will have  

to be held applicable.

22. Identical view has been taken even in Venture Global Engineering’s  

case (cited supra) where the Court took the view that even the foreign award  

could be challenged under Section 34 of the Act.  This is a judgment by Two  

Judges  Bench.   The  observations  made  in  paragraphs  31,  35  and  37  are  

extremely apposite and binding.   The comments against  this judgment that  it  

does not consider the question of implied exclusion would be of no consequence  

in view of the findings which have earlier been referred to.  In the present matter  

it cannot be said that there was any implied exclusion of the provisions of Part I.  

The law laid down, therefore, is clearly binding.

23. Similarly  the  language  of  Clause  10.1,  it  is  suggested  was  expressly  

agreed between the parties that the procedural law would be that of California.  

The suggestion given by the learned senior counsel for the respondent that since  

the provision about the arbitration is included in the same sentence the intention  

must  be presumed that  the parties intended only the Californian law even to  

govern the procedure.  As I have said, that by itself it cannot be the way to read  

the said Cause as the decision in  Bhatia International (cited supra) was  

available on the date when the agreement was signed.

24. This means that the contentions raised based on the three foreign cases  

by Shri K.K. Venugopal James Miller & Partners’ case (cited supra), Bay  

Hotel and Resort’ case (cited supra) and  ABB Lummus Global’s case  

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(cited supra) need not be considered in view of the binding nature of the three  

aforementioned decisions  in  Bhatia International  (cited supra), Venture  

Global  Engineering’s  case  (cited  supra),  and  Indtel  Technical   

Services’ case (cited supra).  However, since those cases are actively relied  

upon the same are considered as follows.

25. In the first mentioned case, the question was as to the applicable law of  

contract  and  not  the  applicable  law  of  arbitration  where  the  parties  had  

specifically agreed on the law of contract.  The factual situation was, therefore,  

different.  The relied on observations at page 616 of the decision are more in the  

nature of obiter.

26. In so far as the Bay Hotel and Resort’ case (cited supra) is concerned  

the reliance is placed on paragraph 35 of the said decision to the following effect:

“Two points  in  the speech of  Lord Wilberforce are notable  here.   First,  he  said  that  in  the  normal  case  where  the  contract  itself  is  governed  by  English  law,  any  arbitration  would be held under English procedure.  Secondly, he said  that the mere fact that the arbitrator was to set either partly or  exclusively in another part of the United Kingdom, or, for that  matter, abroad, would not lead to a different result; the place  might  be  chosen  for  many  reasons  of  convenience  or  be  purely  accidental;  a  choice  so  made should  not  affect  the  parties’ rights.  The passage in his speech is at page 616 of  the report.”

These observations apply to the normal case which is not a case here.  

27. As regards the third decision in  ABB Lummus Global’s case (cited  

supra) the relied upon passage again does not clinch the issue.  What is stated  

there is that where the parties chose the curial law of arbitration they would be  

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taken to chose the place and sitting of arbitration.  In my opinion the observations  

are not apposite to the present controversy.   

28. In the result the application must succeed.  Accordingly, I appoint Hon’ble  

Mr.  Justice  R.C.Lahoti  (Ex.CJI) as  the  sole  Arbitrator  to  arbitrate  upon  the  

disputes which have arisen between the parties hereto as set out in the present  

application.  The sole Arbitrator would be entitled to decide upon the procedure  

to be followed in the arbitration proceedings, sittings of the proceedings as also  

to settle his fees in respect thereof.  However, the law governing the contract  

would be the Californian Law.

29. The application is accordingly allowed.

…………………….J. ( V.S. Sirpurkar )

New Delhi April 20, 2009.

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Digital  Performa

Case No.  : Arbitration Application No. 8 of 2008

Date of Decision : 20.04.2009

Cause Title :  Citation Infowares Limited  Vs.

Equinox Corporation  

Coram :  Hon’ble Mr. Justice V.S. Sirpurkar      

C.A.V. On : 20.03.2009

Judgment  delivered by :  Hon’ble Mr. Justice V.S. Sirpurkar

Nature of Order  : Reportable

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