“REPORTABLE”

THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

Arbitration Petition No. 5 of 2008

M/s Dozco India P. Ltd. … Petitioner

Versus

M/s Doosan Infracore Co. Ltd.       … Respondent

J U D G M E N T

V.S. SIRPURKAR, J.

1. This  is  a  petition  under  section  11(6)  of  the  

Arbitration  and  Conciliation  Act  (hereinafter  called  

‘the Act’).  While the petitioner is registered under  

the Companies Act, 1956, the respondent is a company  

incorporated in Seoul, South Korea with its principle  

place at Seoul.  The disputes have arisen in between  

these two companies out of a Distributorship Agreement  

which was entered between the parties on 2.2.2004.  By  

this,  the  petitioner  was  to  be  the  exclusive  

distributor of the respondent in India and Bhutan for  

its  products  like  Excavators,  Wheel  Loaders  etc.  

Article  23  of  the  Distributorship  Agreement  provides  

1

for the resolution of disputes by arbitration.  Since  

the disputes have arisen in between the two companies  

and since one of the companies is based in Seoul, South  

Korea,  the  present  petition  has  been  filed  treating  

this to be an international arbitration.  There is no  

dispute  between  the  parties  that  this  will  be  the  

international  arbitration  on  the  basis  of  the  

arbitration  Clause  being  Article  23  of  the  

Distributorship Agreement.

2. There is also no dispute that the disputes have  

arisen  between  the  parties  on  account  of  which  the  

respondent purported to terminate the Agreement entered  

into between them.  In pursuance of the disputes, the  

petitioner  issued  notice  dated  01.09.2007  for  

appointment of an Arbitrator to resolve the disputes  

arisen between the parties.  However, that not having  

been done, the present petition is necessitated.

3. Since  the  parties  have  not  disputed  about  the  

existence of the arbitration clause, a live issue on  

account of the existence of the disputes, there would  

be no question of recording any finding.  However, for  

putting the record straight, the issues as raised by  

the petitioner are as follows:

2

“1. whether  the  premature  and  whether  allegedly  premature  and  unilateral  termination  of  the  distributorship  agreement by the respondent is valid in  law.

2. whether the various contentions raised  by  respondent  for  terminating  the  distributorship agreement are valid in  law

3. whether  the  respondent  are  right  in  unilaterally  raising  the  price  of  the  products in the middle of the year

4. whether  the  respondent  is  right  in  unilaterally  controlling  the  supplies  to the petitioner

5. whether the respondent is stopped from  its  promise  to  the  petitioner  to  appoint them as national dealer for 10  years

6. whether the respondents are liable for  damages to petitioner for breach”

4. The  petition  is  countered  on  behalf  of  the  

respondent  who  opposes  the  same  on  account  of  

maintainability.  According to the respondent, only the  

Rules  of  Arbitration  of  International  Chamber  of  

Commerce would apply in accordance with the Agreement  

between the parties.  It is contended by the respondent  

that  this  Court  will  have  no  jurisdiction  much  less  

under Section 11(6) of the Act to appoint Arbitrator,  

particularly, because it has been specifically agreed  

in Article 22 and 23 which are as under:

3

“Article 22.     Governing Laws – 22.1   : This  agreement shall be governed by and construed  in accordance with the laws of The Republic  of Korea.

Article  23.  Arbitration  -  23.1  : All  disputes  arising  in  connection  with  this  Agreement  shall  be  finally  settled  by  arbitration in Seoul, Korea (or such other  place as the parties may agree in writing),  pursuant to the rules of agreement then in  force  of  the  International  Chamber  of  Commerce (emphasis supplied)”

5. The  respondent,  therefore,  contended  that  the  

petitioner  would  not  be  entitled  to  maintain  the  

present proceedings in India by invoking the provisions  

of the Act.  The respondent specifically disputes the  

stand of the petitioner that there is nothing in the  

Agreement  to  deny  the  applicability  of  Indian  

procedural law seeking appointment of Arbitrator.  The  

respondent  also  specifically  contended  that  there  is  

express  exclusion  of  Indian  Courts  and/or  the  

applicability of the Act.  Their basic contention was  

that under the relevant clauses the jurisdiction of the  

Indian  Courts  is  specifically  outstayed.   This  is  

particularly  because  it  is  specifically  provided  in  

Clause 33 that there is an express agreement to get the  

disputes settled by arbitration in Seoul in terms of  

the Rules of Arbitration of Indian Chamber of Commerce,  

4

Paris.  The respondent in its Counter has relied on  

Article 4 of the Rules of Arbitration of International  

Chamber of Commerce.   

6. It seems that previously an application was filed  

under Section 9 of the Act before the Madras High Court  

seeking interim injunction restraining the respondents,  

their men and agents from in any manner dealing with  

their products in India directly till the conclusion of  

the  arbitral  proceedings.   It  was  pointed  out  that  

there was an ex parte order of ad interim injunction by  

the  High  Court  on  8.5.2008.   However,  when  the  

respondent  moved  an  application  for  vacating  the  ex  

parte order, the respondent had specifically contended  

that  the  Courts  at  Chennai  had  no  jurisdiction  to  

entertain the application.  It was pointed out that the  

respondent’s  application  for  vacating  the  injunction  

was allowed by the Madras High Court by its order dated  

9.6.2008.  However, in its order, it seems that the  

Madras High Court clarified that the question relating  

to the jurisdiction of the Court was left open by the  

parties  to  be  decided  at  a  later  stage.   It  also  

recorded a finding that it was not necessary for it to  

go into the question of jurisdiction for the purpose of  

5

considering the injunction application.  The respondent  

has filed the said order before this Court along with  

the application under Section 9.

7. From the rival contentions raised, the only issue  

is whether this Court would be justified and would have  

the jurisdiction to appoint an Arbitrator under Section  

11 (6) of the Act.

8. Ms. Mohana, learned Counsel appearing on behalf of  

the petitioner, heavily relied on a few judgments of  

this  Court,  namely,  Bhatia  International  v.  Bulk  

Trading S.A. & Anr. [2002(4) SCC 105], Indtel Technical  

Services Private Ltd. v. W.S. Atkins Rail Ltd. [2008  

(10) SCC 308] and Citation Infowares Ltd. v. Equinox  

Corporation [2009  (7)  SCC  220].   All  these  cases,  

according to her have settled the law holding that even  

in case of international commercial arbitration which  

are  to be  held out  of India  and to  be governed  by  

foreign law, the provisions of Part I of the Act would  

still apply unless the parties by agreement, express or  

implied, excludes all or any of provisions of Part I of  

the Act.  She has also drawn the attention of the Court  

to another decision of this Court in  National Thermal  

Power Corporation v. Singer Company & Ors.  [1992 (3)  

6

SCC 551].  The attention of the Court was also invited  

to the language of the decision in  CMC Ltd. v. Unit  

Trust of India & Ors. [2007 (10) SCC 751].  There are  

some other rulings which are relied upon by the learned  

Counsel.  The main contention, however, is based on  

paragraph 32 of the decision in Bhatia International v.  

Bulk  Trading  S.A.  &  Anr. (cited  supra)  as  also  

paragraph  36  of  the  decision  in  Indtel  Technical  

Services Private Ltd. v. W.S. Atkins Rail Ltd. (cited  

supra), where reliance was placed on the decision in  

Bhatia International v. Bulk Trading S.A. & Anr. (cited  

supra) which  is  decision  rendered  by  a  Three  Judge  

Bench.  The attention of the Court was also invited to  

paragraphs 30, 31 and 36 as also to paragraphs 35, 38  

of  that  judgment  where  the  decision  in  Bhatia  

International v. Bulk Trading S.A. & Anr. (cited supra)  

was relied upon.  From all these three judgments, it  

becomes  clear  that  unless  the  jurisdiction  of  the  

Indian  Courts  is  not  specifically  excluded  at  least  

Part  I  of  the  Act  whereunder  there  is  a  power  to  

appoint Arbitrator is covered by Section 11 (6) of the  

Act, this Court would have jurisdiction to appoint an  

Arbitrator even if the arbitration is to be governed by  

foreign law.

7

9. Shri  Gurukrishna  Kumar,  learned  Counsel  for  the  

respondent,  however,  while  opposing  this  plea  urged  

that in this case and, more particularly, in paragraph  

23 such exclusion can be specifically seen.  He has  

compared the language of Clause 23, more particularly,  

with  the  jurisdictional  cause  which  had  fallen  for  

consideration  in  Citation  Infowares  Ltd.  v.  Equinox  

Corporation (supra).  The learned Counsel also argued  

that  the  bracketed  portion  in  Article  23  cannot  be  

interpreted so as to mean that the seat of arbitration  

could  be  anywhere  else  as  per  the  choice  of  the  

parties.  He pointed out that the bracketed portion is  

only for the purpose of providing the convenience of  

holding proceedings of the arbitration else where than  

Seoul.  However, that cannot be allowed to override the  

main Clause of Article 23.  The learned Counsel has  

contended  that  the  law  laid  down  in  Bhatia  

International v. Bulk Trading S.A. & Anr. (cited supra)  

and the subsequent decisions would not be applicable.  

The learned Counsel relied on Sumitomo Heavy Industries  

Ltd. v. ONGC Ltd. & Ors. [1998 (1) SCC 305].  He also  

relied  on  a  decision  reported  as  Naviera  Amozonica  

Peruana S.A. v. Compania Internationacional De Seguros  

Del Peru [1998] Vol.1 Lloyd’s Law Reports.

8

10. The learned Counsel earnestly argued that there is  

distinction between a legal seat of the arbitration and  

geographically  convenient  location  for  holding  

proceedings  and  that  is  a  common  feature  of  

international arbitration.  He also relied on a passage  

in Redfern and Hunter which runs as under:

“The  preceding  discussion  has  been  on  the  basis  that  there  is  only  one  ‘place’  of  arbitration.  This will be the place chosen  by or on behalf of the parties and it will  be  designated  in  the  arbitration  agreement  or the terms of reference or the minutes of  proceedings  or  in  some  other  was  as  the  place of ‘seat’ of the arbitration.  This  does  not  mean,  however,  that  the  arbitral  Tribunal  must  hold  all  its  meeting  or  hearings  at  the  place  of  arbitration.  International  commercial  arbitration  often  involves  people  of  many  different  nationalities, from different countries.  In  these  circumstances,  it  is  by  no  means  unusual  for  an  arbitral  Tribunal  to  hold  meeting- or even hearing – in a place other  than  the  designated  place  of  arbitration,  either for its own convenience or for the  convenience  of  the  parties  or  their  witnesses…  It may be more convenient for an  arbitral tribunal sitting in one country to  conduct a hearing in another country – for  instance for the purpose of taking evidence  …  In such circumstances, each move of the  arbitral  Tribunal  does  not  if  itself  mean  that the seat of arbitration changes.  The  seat  of  the  arbitration  remain  the  place  initially  agreed  by  or  on  behalf  of  the  parties” (Emphasis supplied)

11. According to him, as per the Agreement between the  

parties, it is clear that the parties have chosen the  

9

proper  law  of  contract  as  also  the  arbitration  

agreement to be Korean law with a seat of arbitration  

in  Seoul, South  Korea and  the arbitration  law being  

conducted in accordance with exhaustive Rules of the  

International Chamber of Commerce.

12. On the backdrop of these conflicting claims, the  

question  boils  down  to  as  to  what  is  the  true  

interpretation  of Article  23.  This Article  23 will  

have to be read in the backdrop of Article 22 and more  

particularly,  Article  22.1.   It  is  clear  from  the  

language of Article 22.1 that the whole Agreement would  

be  governed by  and construed  in accordance  with the  

laws of The Republic of Korea.  It is for this reason  

that the respondent heavily relied on the law laid down  

in  Sumitomo Heavy Industries Ltd. v. ONGC Ltd. & Ors.  

(cited supra).  This judgment is a complete authority  

on  the  proposition  that  the  arbitrability  of  the  

dispute  is  to  be  determined  in  terms  of  the  law  

governing  arbitration  agreement  and  the  arbitration  

proceedings has to be conducted in accordance with the  

curial law.  This Court, in that judgment, relying on  

Mustill and Boyd (the Law and Practice of Commercial  

Arbitration  in  England,  2nd Edition),  observed  in  

1

paragraph 15 that where the law governing the conduct  

of the reference is different from the law governing  

the underlying arbitration agreement, the Court looks  

to the arbitration agreement to see if the dispute is  

arbitrable,  then  to  the  curial  law  to  see  how  the  

reference should be conducted and then returns to the  

first  law  in  order  to  give  effect  to  the  resulting  

award.  In paragraph 16, this Court, in no uncertain  

terms, declared that the law which would apply to the  

filing  of  the  award,  to  its  enforcement  and  to  its  

setting aside would be the law governing the agreement  

to  arbitrate  and  the  performance  of  that  agreement.  

The Court relied on the observations in  Mustill and  

Boyd to the effect:-

“It may, therefore, be seen that problems arising out  of an arbitration may, at least in theory, call for the  application of any one or more of the following laws -

1. The  proper  law  of  the  contract,  i.e.  the  law  governing  the  contract  which  creates  the  substantive  rights of the parties, in respect of which the dispute  has arisen.

2. The proper law of the arbitration agreement, i.e.  the  law  governing  the  obligation  of  the  parties  to  submit the disputes to arbitration, and to honour an  award.

3. The curial law, i.e. the law governing the conduct  of the individual reference.

xxxxx xxxxx xxxxx

1

1. The  proper  law  of  the  arbitration  agreement  governs the validity of the arbitration agreement, the  question whether a dispute lies within the scope of the  arbitration agreement; the validity of the notice of  arbitration;  the  Constitution  of  the  tribunal;  the  question whether an award lies within the jurisdiction  of the arbitrator; the formal validity of the award;  the question whether the parties have been discharged  from any obligation to arbitrate future disputes.

2. The curial law governs; the manner in which the  reference is to be conducted; the procedural powers and  duties of the arbitrator; questions of evidence; the  determination of the proper law of the contract.

3. The  proper  law  of  the  reference  governs:  the  question whether the parties have been discharged from  their obligation to continue with the reference of the  individual dispute.”  (Emphasis supplied)

The  following  paragraph  from  Mustill  and  Boyd is  

extremely important for the decision of this case:-

“In the absence of express agreement, there is a strong  prima  facie  presumption  that  the  parties  intend  the  curial  law  to  be  the  law  of  the  'seat'  of  the  arbitration, i.e. the place at which the arbitration is  to be conducted, on the ground that that is the country  most  closely  connected  with  the  proceedings.  So  in  order to determine the curial law in the absence of an  express choice by the parties it is first necessary to  determine the seat of the arbitration, by construing  the agreement to arbitrate.”

In paragraphs 15 and 16, this Court has heavily  

relied on the observations quoted above.  If we see the  

language of Article 23.1 in the light of the Article  

22.1, it is clear that the parties had agreed that the  

disputes arising out of the Agreement between them would  

be finally settled by the arbitration in Seoul, Korea.  

1

Not only that, but the rules of arbitration to be made  

applicable were the Rules of International Chamber of  

Commerce.  This gives the prima facie impression that  

the seat of arbitration was only in Seoul, South Korea.  

However, Ms. Mohana, learned Counsel appearing on behalf  

of the petitioner drew our attention to the bracketed  

portion  and  contended  that  because  of  the  bracketed  

portion which is to the effect “or such other place as  

the parties may agree in writing”, the seat could be  

elsewhere also.  It is based on this that Ms. Mohana  

contended that, therefore, there is no express exclusion  

of Part I of the Act.  It is not possible to accept this  

contention for the simple reason that a bracket could  

not be allowed to control the main clause.  Bracketed  

portion is only for the purposes of further explanation.  

In my opinion, Shri Gurukrishna Kumar, learned Counsel  

appearing  on  behalf  of  the  respondent,  is  right  in  

contending that the bracketed portion is meant only for  

the  convenience  of  the  arbitral  Tribunal  and/or  the  

parties  for  conducting  the  proceedings  of  the  

arbitration, but the bracketed portion does not, in any  

manner, change the seat of arbitration, which is only  

Seoul, Korea.  The language is clearly indicative of the  

express exclusion of Part I of the Act.  If there is  

1

such  exclusion,  then  the  law  laid  down  in  Bhatia  

International v. Bulk Trading S.A. & Anr. (cited supra)  

must apply holding:-

“In cases of international commercial arbitrations held  out of India provisions of Part I would apply unless the  parties by agreement, express or implied, exclude all or  any of its provisions.  In that case, the laws or rules  chosen by the parties would prevail.  Any provision in  Part I, which is contrary to or excluded by that law or  rules will not apply.”

Even in Indtel Technical Services Private Ltd. v. W.S.  

Atkins  Rail  Ltd.  (cited  supra),  the  parties  had  not  

chosen  the  law  governing  the  arbitration  procedure  

including  the  seat/venue  of  arbitration  and  it  was,  

therefore,  that  the  Court  went  on  to  exercise  the  

jurisdiction under Section 11(6) of the Act.  It was  

specifically found therein that there was no exclusion  

of  the  provisions  of  the  Act  by  the  parties  either  

expressly  or  impliedly,  which  is  clear  from  the  

observations made in the paragraph 37 of that judgment.

13. Ms. Mohana, learned Counsel appearing on behalf of  

the  petitioner,  however,  very  heavily  relied  on  the  

decision  in  Citation  Infowares  Ltd.  v.  Equinox  

Corporation (cited supra).  There also, the parties had  

agreed to be governed by the laws of California, USA.  

1

The learned Counsel invited our attention to the Clause  

10.1 of the agreement therein, which runs 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.”

Ms. Mohana further submitted that the language of  

this Clause is quite comparable to Article 23.1 of the  

Distributorship Agreement between the parties in this  

case, whereas, Shri Gurukrishna Kumar, learned Counsel  

for the respondent contended that there is essential  

difference in the language of both the Clauses.  He  

pointed  out  that  the  language  of  Article  23.1,  in  

contradistinction with the Clause 10.1 in the case of  

Citation Infowares Ltd. v. Equinox Corporation (cited  

supra),  clearly  spells  out  that  the  seat  of  the  

arbitration  was  agreed  to  be  in  Seoul,  Korea  and  

thereby, there would be express exclusion of Part I of  

the Act.  In my opinion, there is essential difference  

between the clauses referred to in the case of Citation  

Infowares Ltd. v. Equinox Corporation (cited supra) as  

also in Indtel Technical Services Private Ltd. v. W.S.  

Atkins Rail Ltd. (cited supra) on one hand and Article  

1

23.1  in  the  present  case,  on  the  other.   Shri  

Gurukrishna  Kumar  rightly  pointed  out  that  the  

advantage  of  bracketed  portion  cannot  be  taken,  

particularly,  in  view  of  the  decision  in  Naviera  

Amozonica Peruana S.A. v. Compania Internationacional  

De  Seguros  Del  Peru  (cited  supra),  wherein  it  was  

held:-

“All  contracts  which  provide  for  arbitration  and  contain a foreign element may involve three potentially  relevant  systems  of  law:  (a)  the  law  governing  the  substantive  contract;  (2)  the  law  governing  the  agreement  to  arbitrate  and  the  performance  of  that  agreement;  (3)  the  law  governing  the  conduct  of  the  arbitration.  In the majority of the cases all three  will be the same, but (1) will often be different from  (2) and (3) and occasionally, but rarely, (2) may also  differ from (3)”.

That is exactly the case here.  The language of  

Article 23.1 clearly suggests that all the three laws  

are the laws of The Republic of Korea with the seat of  

the arbitration in Seoul, Korea and the arbitration to  

be  conducted  in  accordance  with  the  rules  of  

International Chamber of Commerce.  In respect of the  

bracketed portion, however, it is to be seen that it  

was observed in that case:-

“….  It seems clear that the submissions advanced below  confused the legal “seat” etc. of an arbitration with  the  geographically  convenient  place  or  places  for  holding  hearings.   This  distinction  is  nowadays  a  

1

common  feature  of  international  arbitrations  and  is  helpfully  explained  in  Redfern  and  Hunter  in  the  following  passage  under  the  heading  “The  Place  of  Arbitration”:

The  preceding  discussion  has  been  on  the  basis  that  there is only one “place” of arbitration.  This will be  the place chosen by or on behalf of the parties; and it  will be designated in the arbitration agreement or the  terms of reference or the minutes of proceedings or in  some  other  way  as  the  place  or  “seat”  of  the  arbitration.   This  does  not  mean,  however,  that  the  arbitral  tribunal  must  hold  all  its  meetings  or  hearings at the place of arbitration.  International  commercial  arbitration  often  involves  people  of  many  different nationalities, from many different countries.  In these circumstances, it is by no means unusual for  an  arbitral  tribunal  to  hold  meetings  -  or  even  hearings - in a place other than the designated place  of arbitration, either for its own convenience or for  the convenience of the parties or their witnesses……….

It  may  be  more  convenient  for  an  arbitral  tribunal  sitting in one country to conduct a hearing in another  country  –  for  instance,  for  the  purpose  of  taking  evidence…..  In such circumstances, each move of the  arbitral tribunal does not of itself mean that the seat  of  the  arbitration  changes.   The  seat  of  the  arbitration remains the place initially agreed by or on  behalf of the parties.

These aspects need to be borne in mind when one comes  to the Judge’s construction of this policy.”

It  would  be  clear  from  this  that  the  bracketed  

portion in the Article was not for deciding upon the  

seat of the arbitration, but for the convenience of the  

parties  in  case  they  find  to  hold  the  arbitration  

proceedings somewhere else than Seoul, Korea.  The part  

which  has  been  quoted  above  from  the  decision  in  

Naviera  Amozonica  Peruana  S.A.  v.  Compania  

1

Internationacional  De  Seguros  Del  Peru  (cited  supra)  

supports this inference.  In that view, my inferences  

are that:-

1.  a clear language of Articles 22 and 23 of the  

Distributorship Agreement between the parties in this  

case spell out a clear agreement between the parties  

excluding Part I of the Act.

2. the law laid down in Bhatia International v. Bulk  

Trading S.A. & Anr. (cited supra) and Indtel Technical  

Services Private Ltd. v. W.S. Atkins Rail Ltd. (cited  

supra), as also in  Citation Infowares Ltd. v. Equinox  

Corporation  (cited  supra) is  not  applicable  to  the  

present case.

3. Since the interpretation of Article 23.1 suggests  

that the law governing the arbitration will be Korean  

law and the seat of arbitration will be Seoul in Korea,  

there will be no question of applicability of Section  

11(6) of the Act and the appointment of Arbitrator in  

terms of that provision.

14.  In terms of what is stated above, the petition is  

dismissed, but without any costs.

1

…………………………….J. (V.S.Sirpurkar)

New Delhi; October 8, 2010.  

1

2