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PETITIONER: NATIONAL THERMAL POWER CORPORATION

       Vs.

RESPONDENT: SINGER COMPANY AND ORS.

DATE OF JUDGMENT07/05/1992

BENCH: THOMMEN, T.K. (J) BENCH: THOMMEN, T.K. (J) AGRAWAL, S.C. (J)

CITATION:  1993 AIR  998            1992 SCR  (3) 106  1992 SCC  (3) 551        JT 1992 (3)   198  1992 SCALE  (1)1034

ACT:      Arbitration Act, 1940:      Section  1(2)-Applicability  of  the  Act-International Commercial  arbitration  agreement-Indian  company  entering into  contract  with a  foreign  company-Arbitration  clause contained in the contract-Stipulation that laws in force  in India  applicable and Courts of Delhi would  have  exclusive jurisdiction-Rules   of  conciliation  and  arbitration   of International Chamber of Commerce applicable as agreed upon- Dispute  referred  to Arbitral Tribunal constituted  as  per these  Rules-Award made in London, the seat of  arbitration- Whether the award is governed by the Arbitration Act, 1940.      Foreign Awards (Recognition and Enforcement) Act, 1961:      Sections  2 and 9-International commercial  arbitration agreement-Award  made in a foreign country-Laws in force  in India  applicable  as  agreed upon  by  parties-Such  award- Whether to be regarded as foreign award or domestic award.      Private International Law :      International  contracts-Law  governing  the  contract- Parties  at  liberty to make choice of the  law  applicable- Substantive   as  also  procedural-In  absence  of   choice, presumption  that  laws of country  where  arbitration  held applicable-However  presumption rebuttable having regard  to true  intention of parties-Proper law of  contract-What  is- Doctrine of renvoi-Applicability of.      Words & Phrases :      ’Proper Law of Contract’-Meaning of.

HEADNOTE:      The   appellant  Corporation  and  Respondent   Company entered  into two agreements on 17.8.1982 at New  Delhi  for the supply of equipment,                                                        107 erection  and commissioning of certain works in  India.   It was agreed that the law applicable to the contract would  be the  laws  in force in India and that the  Courts  of  Delhi would  have  the  exclusive  jurisdiction.   The  agreements contained a specific provision that any dispute arising  out of  the  contract  should be decided  as  per  the  relevant clauses   of  the  General  conditions  of   the   contract. According  to  the  General Terms, the  Respondent  being  a

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foreign  contractor it would be governed by  the  provisions relating  to foreign contractors.  It further  provided  for settlement   of   disputes  amicable,   failing   which   by arbitration  which would be conducted by  three  arbitrators one each to be nominated by the owner and the Contractor and a  third to be named by the President of  the  International Chamber of Commerce (I.C.C.).      A dispute arose between the parties and it was referred to  the Arbitral Tribunal constituted in terms of  rules  of arbitration of the ICC Courts Rules and London was chosen by the  ICC  Court as the place of arbitration.   The  Tribunal made an interim award.      The  appellant corporation filed an  application  under the provisions of the Arbitration Act, 1940 before the Delhi High Court for setting aside the said interim award.      The High Court held that the award was not governed  by the  Arbitration  Act, 1940; the  arbitration  agreement  on which  the  award was made was not governed by  the  law  of India; The award fell within the ambit of the Foreign Awards (Recognition  and Enforcement) Act, 1961; London  being  the seat  of arbitration, English Courts alone had  jurisdiction to set aside the award; and, that it had no jurisdiction  to entertain  the application filed under the Arbitration  Act, 1940.      Being  aggrieved  against the High Court’s  order,  the appellant  corporation  preferred  the  present  appeal   by special leave.      On  behalf of the appellant, it was contended that  the substantive  law which governed the arbitration  was  Indian law and so the competent courts were Indian Courts.  It  was also  contended that even in respect of procedural  matters, the  concurrent jurisdiction of the courts of the  place  of arbitration  did  not  exclude the  jurisdiction  of  Indian Courts.      It  was contended on behalf of the  respondent  company that while the                                                        108 main  contract  was  governed by Indian  law,  as  expressly stated  by  the  parties,  arbitration  being  a  collateral contract  and procedural in nature, it was  not  necessarily bound  by  the  proper  law of the  contract,  but  the  law applicable to it must be determined with reference to  other factors  and  the  place of  arbitration  was  an  important factor.   It  was further contended that  since  London  was chosen  to be the seat of arbitration, English law  was  the proper  law  of arbitration, and all  proceedings  connected with it would be governed by that law and exclusively within the jurisdiction of the English courts; and that the  Indian courts  had  no jurisdiction in matters connected  with  the arbitration,  except to the extent permitted by the  Foreign Awards Act for recognition and enforcement of the award.      On  the question as to which was the law that  governed the agreement on which the award had been made :      Allowing the appeal, this Court,      HELD  :  1. The High Court was wrong  in  treating  the award  in question as a foreign award.  The  Foreign  Awards Act  has  no  application  to the award  by  reason  of  the specific exclusion contained in Section 9 of that Act.   The award  is governed by the laws in force in India,  including the Arbitration Act, 1940. [132-C]      2. The expression ’proper law of a contract’ refers  to the  legal  system  by which the  parties  to  the  contract intended  their contract to be governed. If their  intention is  expressly stated or if it can be clearly  inferred  from the  contract itself or its surrounding circumstances,  such

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intention  determines the proper law of the  contract.   The only  limitation on this rule is that the intention  of  the parties must be expressed bona fide and and it should not be opposed to public policy.  Where, however, the intention  of the  parties in not expressly stated and no inference  about it  can be drawn, their intention as such has no  relevance. In  that event, the courts endeavour to impute an  intention by  identifying the legal system with which the  transaction has its closest and most real connection. [118-B, E, F]      Hamlyn & Co. v. Taliskar Distillery, (1891-4) All  E.R. 849;  Vita  Food Products Inc. v. Unus  Shipping  Co.  Ltd., (1939) AC 277 (PC), relied on.      Dicey & Morries : The Conflict of Laws, 11th Edn.  Vol. II PP.1161-62, referred to.                                                   109      3. Mere selection of a particular place for  submission to  the  jurisdiction of the courts or for  the  conduct  of arbitration  will not, in the absence of any other  relevant connection factor with that place, be sufficient to draw  an inference as to the intention of the parties to be  governed by  the  system  of law prevalent in that  place.   This  is specially   so  in  the  case  of  arbitration.    This   is particularly  true  when  the place of  arbitration  is  not chosen by the parties themselves, but by the arbitrators  or by  an  outside body, and that too for  reasons  unconnected with  the  contract.   Choice of  place  for  submission  to jurisdiction of courts or for arbitration may thus prove  to have  little  relevance for drawing an inference as  to  the governing  law  of the contract, unless  supported  in  that respect  by  the rest of the contract  and  the  surrounding circumstances.  Any such clause must necessarily give way to stronger  indications  in  regard to the  intention  of  the parties. [119 C-G]      Jacobs  Marcus & Co. v. The Credit Lyonnais, [1884]  12 Q.B.D.  589  (C.A.);  The Fehmarn, (1958) 1  All  E.R.  333, relied on.      4.  Where the parties have not expressly  or  impliedly selected  the proper law, the courts impute an intention  by applying  the objective test to determine what  the  parties would  have  as  just and  reasonable  persons  intended  as regards  the applicable law had they applied their minds  to the question.  The Judge has to determine the proper law for the parties in such circumstances by putting himself in  the place  of  a "reasonable man".  For this purpose  the  place where  the  contract was made, the form and  object  of  the contract,  the place of performance, the place of  residence or  business of the parties, reference to the courts  having jurisdiction and such other links are examined by the courts to  determine the system of law with which  the  transaction has  its closest and most real connection.   The  expression ’proper  law’  refers to the substantive principles  of  the domestic law of the chosen system and not to its conflict of laws or rules. [120 A-C; 121 A-B]      The  Assunzione,  (1954) p.150,  (C.A.);  Mount  Albert Borough  Council  v.  Australasian  Temperance  and  General Mutual Life Assurance Society Ltd., (1938) A.C. 224  (P.C.), relied on.      Dicey & Morris : The Conflict of Laws, 11th Edn.,  Vol. I pp.534-535; Vol. IIp.1164, referred to.      5.  Where,  there  is  no express  choice  of  the  law governing  the  contract  as a  whole,  or  the  arbitration agreement as such, a presumption may arise                                                        110 that the law of the country where the arbitration is  agreed to  be held is the proper law of the arbitration  agreement.

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But that is only a rebuttable presumption. [121 G-H]      Whitworth Street  Estates (Manchester)  Ltd.  v.  James Miller & Partners Ltd., 1970 AC 583. referred to.      Dicey  & Moris : The Conflict of Laws, 11th Edn.  Vol.I p.539, referred to.      6.  The  validity,  effect and  interpretation  of  the arbitration agreement are governed by its proper law.   Such law  will  decide  whether the 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. [122- B]      Heyman  & Anr. v. Darwins Ltd., 1942 (1) All E.R.  337, referred to.      7.  The parties  have the freedom to  choose  the  law governing an international commercial arbitration agreement. They   may   choose  the  substantive  law   governing   the arbitration   agreement  as  well  as  the  procedural   law governing the conduct of the arbitration.  Where the  proper law  of the contract is expressly chosen by the parties,  as in  the  present case, such law must, in the absence  of  an unmistakable   intention   to  the  contrary,   govern   the arbitration agreement. [122 D-E]      8.  The proper law of the contract in the present  case being expressly stipulated to be the laws in force in  India and the exclusive jurisdiction of the court in Delhi in  all matters arising under the contract having been  specifically accepted, and the parties not having chosen expressly or  by implication a law different from the Indian law in regard to the  agreement  contained  in the  arbitration  clause,  the proper law governing the arbitration agreement is indeed the law  in  force in India, and the competent  courts  of  this country must necessarily have jurisdiction over all  matters concerning arbitration.  Neither the rules of procedure  for the  conduct  of  arbitration contractually  chosen  by  the parties   viz.,   the  I.C.C.  Rules   nor   the   mandatory requirements  of the procedure followed in the court of  the country  in which the arbitration is held can in any  manner supersede the overriding jurisdiction and control of  the Indian law and the Indian courts. [123 F-H; 124-A]                                                     111      Bank Mellat v. Helliniki Techniki SA, (1983) 3 All E.R. 428, referred to.      International Chamber of Commerce Arbitration, 2nd  Ed. (1990);  Commercial Arbitration, 2nd Ed., Allen Redfern  and Martin  Hunter, Law & Practice of  International  Commercial Arbitration,  1986; Russel on Arbitration 20th  Ed.  (1982); Cheshire  &  North’s  Private International  Law,  11th  Ed. (1987), referred to.      9. The procedural powers and duties of the arbitrators, are matters regulated in accordance with the rules chosen by the  parties to the extent that those rules  are  applicable and  sufficient and are not repugnant to the retirements  of the procedural law and practice of the seat of  arbitration. The  concept of party autonomy in international contract  is respected  by  all  systems  of law so  far  as  it  is  not incompatible  with  the proper law of the  contract  or  the mandatory   procedural   rules  of  the  place   where   the arbitration  is  agreed to be conducted  or  any  overriding public policy. [124 B-D]      10.  An  award rendered in the territory of  a  foreign State may be regarded as a domestic award in India where  it is  sought to be enforced by reason of Indian law being  the

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proper  law governing the arbitration agreement in terms  of which   the  award  was  made.   The  Foreign   Awards  Act, incorporating  the New York Convention, leaves no  room  for doubt on the point. [125-E]      ICC  Rules  of  Arbitration,  1988;  Craig,  Park   and Paulsson  : International Chamber of  Commerce  Arbitration, 2nd Ed. (1990), referred to.      11. The difference between an ad hoc arbitration and an institutional  arbitration, is not a difference between  one system  of law and another; for whichever is the proper  law which  governs either proceeding, it is merely a  difference in  the  method of appointment and conduct  of  arbitration. Either method is applicable to an international arbitration, but  neither  is  determinative  of  the  character  of  the resultant  award,  namely, whether or not it  is  a  Foreign Award as defined under the Foreign Awards Act, 1961.                                           [125-H, 126 A-B]      12.  An  arbitration  agreement may be  regarded  as  a collateral  or  ancillary  contract in  the  sense  that  it survives to determine the claims of the parties and the mode of settlement of their disputes even after the breach or                                                        112 repudiation  of  the  main  contract.   But  it  is  not  an independent  contract,  and it has no  meaningful  existence except  in  relation to the rights and  liabilities  of  the parties  under  the  main  contract.   It  is  a  procedural machinery  which  is activated when disputes  arise  between parties  regarding  their rights and liabilities.   The  law governing  such right and liabilities is the proper  law  of the  contract,  and  unless  otherwise  provided,  such  law governs   the  whole  contract  including  the   arbitration agreement, and particularly so when the latter is  contained not in a separate agreement, but, as in the present case, in one of the clauses of the main contract. [129 A-C]      Heyman  &  Anr. v. Darwins Ltd. 1942 (1) All E.R.  337, Brember Vulkan Schiffbau Und Maschinenfabrik v. South  India Shipping Corpn., 1981 (1) all E.R. 289, relied on.      Mustil & Boyd: Commercial Arbitration, 2nd Ed.  (1989), referred to.      13.  In  a  proceeding such as  the  present  which  is intended  to  be controlled by a set  of  contractual  rules which  are self-sufficient and designed to cover every  step of  the  proceeding,  the  need to  have   recourse  to  the municipal  system  of  law and the courts of  the  place  of arbitration is reduced to the minimum and the courts of that place   are   unlikely  to  interfere  with   the   arbitral proceedings  except  in  cases  which  shock  the   judicial conscience. [130 C-E]      Bank Mellat v. Helliniki Techniki SA, (1983) 3 All E.R. 428, referred to.      14.  If the parties had agreed that the proper  law  of the  contract should be the law in force in India,  but  had also provided for arbitration in a foreign country, the laws of   India   would   undoubtedly   govern   the    validity, interpretation  and  effect  of all  clauses  including  the arbitration  clause in the contract as well as the scope  of the  arbitrators’  jurisdiction.   It is  Indian  law  which governs  the  contract, including  the  arbitration  clause, although  in certain respects regarding the conduct  of  the arbitration  proceedings the foreign procedural law and  the competent courts of that country may have a certain  measure of control. [130 F-G]      International  Tank  and Pipe  SAK v.  Kuwait  Aviation Fueling Co. KSC, (1975) 1 All E.R. 242, relied on.      15. The choice of the place of  arbitration was, as far

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as the parties are concerned, merely accidental in so for as they had not expressed any                                                        113 intention in regard to it and the choice was made by the ICC Court  for reasons totally unconnected with either party  to the  contract.  On the other hand, apart from the  expressly stated  intention  of  the  parties,  the  contract  itself, including the arbitration agreement contained in one of  its clauses,  is  redolent  of India and  matters  Indian.   The disputes  between  the parties under the  contract  have  no connection with anything English, and they have the  closest connection  with  Indian laws, rules and  regulations.   Any attempt to exclude the jurisdiction of the competent  courts and the laws in force in India is totally inconsistent  with the agreement between the parties. [131 A, B, C]      16. All substantive rights arising under the  agreement including that which is contained in the arbitration  clause are governed by the laws of India.  In respect of the actual conduct of arbitration, the procedural law of England may be applicable to the extent that the ICC Rules are insufficient or repugnant to public policy or other mandatory  provisions of  the  laws  in  force  in  England.   Nevertheless,   the jurisdiction  exercisable  by  the English  courts  and  the applicability  of  the laws of that  country  in  procedural matters must be viewed as concurrent and consistent with the jurisdiction   of  the  competent  Indian  courts  and   the operation   of  Indian  laws  in  all   matters   concerning arbitration  in so for as the main contract as well as  that which  is contained in the arbitration clause  are  governed by the laws of India. [131 - H; 132 - A,B]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1978 of 1992.      From  the  Judgment and Order dated  12.2.1991  of  the Delhi High Court in FAO (OS) No. 102 of 1990.      Shanti Bhushan, Dr. A.M. Singhvi, C.Mukhopadhaya,  J.C. Seth, O.P. Mittal, Sudarsh Menon and G.G. Malhotra for  the Appellant.      S.K. Dholakia, O.P. Sharma, D.C. Singhania, Ms.  Nanita Sharma,  Hari  Menon,  P.  Piwany and  R.K.  Gupta  for  the Respondents.      The Judgment of the Court was delivered by      THOMMEN, J. Leave granted.      The  National  Thermal Power Corporation  (the  ’NTPC’) appeals                                                        114 from  the judgment of the Delhi High Court in FAO  (OS)  No. 102/90   dismissing  the  NTPC’s  application  filed   under sections  14,30 and 33 of the Arbitration Act, 1940  (No.  X of  1940) to set aside an interim award made at London by  a tribunal   constituted   by  the  International   Court   of Arbitration  of the International Chamber of  Commerce  (the "ICC  Court")  in terms of the contract made  at  New  Delhi between the NTPC and the respondent the Singer Company  (the ’Singer’)   for  the  supply  of  equipment,  erection   and commissioning  of  certain works in India.  The  High  Court held that the award was not governed by the Arbitration Act, 1940; the arbitration agreement on which the award was  made was not governed by the law of India; the award fell  within the   ambit   of  the  Foreign   Awards   (Recognition   and Enforcement) Act, 1961 (Act 45 of 1961) (the ’Foreign Awards Act’); London being  the seat of arbitration, English Courts

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alone  had  jurisdiction to set aside the  award;  and,  the Delhi  High  Court  had no  jurisdiction  to  entertain  the application filed under the Arbitration Act, 1940.      The  NTPC  and  the  Singer  entered  into  two  formal agreements dated 17.8.1982 at New Delhi.  The General  Terms and  Conditions  of  Contract dated  14.2.81  (the  ’General Terms’)  are  expressly incorporated in the  agreements  and they state :          "the  laws applicable to this Contract shall be the          laws  in force in India.  The Court of Delhi  shall          have exclusive jurisdiction in all matters  arising          under this Contract." (7.2) The General Terms deal with the special responsibilities  of foreign  contractors  and  Indian  contractors.  The  Singer being  a foreign contractor, is governed by  the  provisions relating  to  the foreign contractors.   The  General  Terms further  provide  for  settlement of  disputes  by  amicable settlement, failing which by arbitration.      Sub-clause  6 of clause 27 of the General  Terms  deals with  arbitration  in relation to an Indian  contractor  and sub-clause  7 of the said clause deals with  abitration   in respect of foreign contractor.  The latter provision says:          "27.7.  In  the event of  foreign  Contractor,  the          arbitration    shall   be   conducted   by    three          arbitrators, one each to be nominated by the  Owner          and the Contractor and the third to be named by the          President of the International Chamber of Commerce,          Paris. Save as above all Rules of Cancellation  and          Arbitration                                                        115          of  the  International Chamber  of  Commerce  shall          apply to such arbitrations.  The arbitration  shall          be conducted at such places as the arbitrators  may          determine."      In  respect  of an Indian  Contractor,  sub-clause  6.2 clause  27 says that the arbitration shall be  conducted  at of New Delhi in  accordance  with  the  provisions  of   the Arbitration Act, 1940.  It reads :          "27.6.2.  The  arbitration shall  be  conducted  in          accordance  with  the  provisions  of  the   Indian          Arbitration Act, 1940 or any statutory modification          thereof.   The  venue of arbitration shall  be  New          Delhi, India."      The General Terms further provide :          "the  Contract shall in all respects  be  construed          and governed according to Indian laws." (32.3).      The  formal  agreements which the parties  executed  on 17.8.82  contain  a  specific provision  for  settlement  of disputes. Article 4.1 provides :          "4.1. Settlement of Disputes :  It is  specifically          agreed  by  and between the parties  that  all  the          differences or disputes arising out of the contract          or  touching  the subject matter of  the  contract,          shall  be  decided  by process  of  settlement  and          arbitration  as specified in clause 26.0  and  27.0          excluding  27.61.1  and  27.6.2.,  of  the  General          Conditions of the Contract."      Being  a  foreign contractor, the  provisions  of  sub- clause  6  of  clause  27  of  the  General  Terms  are  not applicable to the Singer, but the other provisions of clause 27  govern the present contract.  Accordingly,  the  dispute which arose between the parties was referred to an  Arbitral Tribunal constituted in terms of the rules of arbitration of the ICC Court (the ’ICC Rules’).  In accordance with Article 12  of  those Rules, the ICC Court chose London  to  be  the

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place of arbitration.      It  is  significant  that the  parties  have  expressly stated that the law which governs their contract, i.e.,  the proper law of the contract is the law in force in India  and the  courts  of  Delhi have exclusive  jurisdiction  in  all matters  arising under the contract.  One of the clauses  of the  Contract  deals  with arbitration  (clause  27  of  the General Terms).                                                        116      The  point for consideration is whether the High  Court was  right  in rejecting the appellant’s  application  filed under  the  provisions of the Arbitration Act, 1940  and  in holding  that  the  award which was made  in  London  on  an arbitration  agreement was not governed by the law of  India and  that it was a foreign award within the meaning  of  the Foreign Awards Act and beyond the jurisdiction of the Indian Courts except for the purpose of recognition and enforcement under the latter Act.      The award was made in London as an interim award in  an arbitration between the  NTPC and a foreign contractor on  a contract governed by the law of India and made in India  for its  performance solely in India.  The fundamental  question is  whether  the  arbitration  agreement  contained  in  the contract  is governed by the law of India so as to  save  it from  the  ambit of the Foreign Awards Act and  attract  the provisions  of the Arbitration Act, 1940.  Which is the  law which governs the agreement on which the award has been made ?      Mr.  Shanti  Bhushan, appearing for the  NTPC,  submits that admittedly the proper law of the contract is the law in force in India.  The arbitration agreement is contained in a clause of that contract.  In the absence of any  stipulation to the contrary, the contract has to be seen as a whole  and the  parties  must  be  deemed to  have  intended  that  the substantive  law applicable to the arbitration agreement  is exclusively  the  law  which  governs  the  main   contract, although,  in respect of procedural matters,  the  competent courts in England will also be, concurrently with the Indian courts,  entitled to exercise jurisdiction over the  conduct of  arbitration.   But  occasions for  interference  by  the courts  in  England  would  indeed  be  rare  and   probably unnecessary in view of the elaborate provisions contained in the  ICC  Rules by which the parties have agreed  to  abide. The  substantive law governing arbitration,  which  concerns questions like capacity, validity, effect and interpretation of the contract etc., is Indian law and the competent courts in  such matters are the Indian courts.  Even in respect  of procedural  matters,  the  concurrent  jurisdiction  of  the courts  of  the place of arbitration does  not  exclude  the jurisdiction of the Indian courts.      Mr.  S.  K. Dholakia appearing for the Singer,  on  the other  hand,  submits that the arbitration  agreement  is  a separate  and distinct contract, and collateral to the  main contract. Although the main contract is governed by the laws in force in India, as stated in the General Terms, there  is no                                                        117 express   statement  as  regards  the  law   governing   the arbitration  agreement.   In  the  circumstances,  the   law governing  the  arbitration agreement is not  the  same  law which  governs the contract, but it is the law which  is  in force  in  the  country in which the  arbitration  is  being conducted.  Counsel accordingly submits that the Delhi  High Court is right in saying that the saving clause in section 9 of the Foreign Awards Act has no application to the award in

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question made in London by an Arbitral Tribunal  constituted in accordance with the ICC Rules.  Counsel submits that  the High  Court has rightly held that the impugned  award  falls under  the  Foreign Awards Act and it is not  liable  to  be challenged on the alleged grounds falling under sections 14, 30 and 33 of the Arbitration Act, 1940.      Counsel says that the award, having been made in London in  terms  of  the  ICC Rules  to  which  the  parties  have submitted,  is  governed by the provisions of the  New  York Convention,  as incorporated in the Foreign Awards Act,  and its  enforeability  in  India can be resisted  only  in  the circumstances postulated under that Act, and the Delhi  High Court  has  rightly  rejected  the  petition  invoking   the jurisdiction of that court in terms of the Arbitration  Act, 1940.      Mr. Dholaka does not dispute that the substantive right of the parties under the Contract are governed by the law of India.   His  contention, however, is that  while  the  main contract  is governed by Indian law, as expressly  stated by the  parties,  arbitration being a collateral  contract  and procedural  in  nature, it is not necessarily bound  by  the proper  law  of the contract, but the law applicable  to  it must  be  determined with reference to other  factors.   The place of arbitration is an important factor.  London  having been chosen in accordance with the ICC Rules to be the  seat of   arbitration,   English  law  is  the  proper   law   of arbitration,  and  all  proceedings connected  with  it  are governed by that law and exclusively within the jurisdiction of  the  English courts.  He denies that the  Indian  courts have   any  jurisdiction  in  matter  connected   with   the arbitration,  except to the extent permitted by the  Foreign Awards Act for recognition and enforcement of the award.      Dicey  &  Morris in The conflict of  Laws,  11th  edn., Vol.  II (’Dicey’) refer to the ’proper law of  a  contract’ thus :          "Rule  180  - The term ’proper law of  a  contract’          means  the  system  of law  by  which  the  parties          intended the contract to be                                                        118          governed  or,  where  their  intention  is  neither          expressed    nor   to   be   inferred   from    the          circumstances,  the  system of law with  which  the          transaction   has   its  closest  and   most   real          connection." (pages 1161-62)      The expression ’proper law of a contract’ refers to the legal  system by which the parties to the contract  intended their  contract  to  be governed.   If  their  intention  is expressly  stated or if it can be clearly inferred from  the contract  itself  or  its  surrounding  circumstances,  such intention determines the proper law of the contract.  In the words of Lord Herchell, L.C. :          "...In  this case, as in all such cases, the  whole          of the contract must be looked at, and the contract          must  be regulated by the intention of the  parties          as  appearing from the contract.  It  is  perfectly          competent to those who, under such circumstances as          I have indicated, are entering into a contract,  to          indicate  by  the  terms which  they  employ  which          system  of  law they intend to be  applied  to  the          construction   of   the  contract,   and   to   the          determination  of  the rights arising  out  of  the          contract".          Hamlyn  & Co. v. Talisker Distillery, (1891-4)  All          E.R. 849 at 852.      Where,  however,  the intention of the parties  is  not

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expressly  stated  and no inference about it can  be  drawn, their intention as such has no relevance.  In that even, the courts endeavour to impute an intention by identifying   the legal system with which the transaction has its closest  and most real connection.      The  expressed  intention of the parties  is  generally decisive  in determining the proper law of the  contract. The  only limitation on this rule is that the  intention  of the parties must be expressed bona fide and it should not be opposed to public policy.  In the words of Lord Wright :-          ".....where  there is an express statement  by  the          parties of their intention to select the law of the          contract, it is difficult to see ____________________________________________________________     Rule  180  is further elucidated by Dicey  in  the  sub-     rules.   Sub-rule (1) reads :- Sub-rule (1) -  When  the     intention  of the parties to a contract,as  to  the  law     governing  the  contract, is expressed  in  words,  this     expressed  intention, in general, determines the  proper     law of the contract."                                                        119          what  qualifications  are  possible,  provided  the          intention  expressed  is bona fide and  legal,  and          provided there is no reason for avoiding the choice          on the ground of public policy........"          Vita Food Products Inc. v. Unus Shipping Co.  Ltd.,          (1939) AC 277, 290 (PC).      In  the  absence  of an  express  statement  about  the governing  law,  the  inferred  intention  of  the   parties determines that law. * The true intention of the parties  in the absence of an express selection, ha to be discovered  by applying " sound ideas of business, convenience and sense to the language of the contract itself".  Jacobs Marcus &  Co., v. The Credit Lyonnais, (1884) 12 Q.B.D. 589, 601 (CA).   In such a case, selection of courts of a particular country  as having jurisdiction in matters arising under the contract is usually,  but  not  invariably,  be  an  indication  of  the intention of the parties that the system of law followed  by those  courts is the proper law by which they  intend  their contract  to be governed.  However, the mere selection of  a particular  place for submission to the jurisdiction of  the courts  or for the conduct of arbitration will not,  in  the absence  of any other relevant connecting factor  with  that place,  be  sufficient  to  draw  an  inference  as  to  the intention of the parties to be governed by the system of law prevalent  in that place.  This is specially so in the  case of   arbitration,  for  the  selection  of  the   place   of arbitration may have little significance where it is chosen, as  is  often the case, without regard to  any  relevant  or significant link with the place.  This is particularly  true when the place of arbitration is not chosen by the   parties themselves,  but by the arbitrators or by an  outside  body, and  that  too for reasons unconnected  with  the  contract. Choice of place for submission to jurisdiction of courts  or for arbitration may thus prove to have little relevance  for drawing  an  inference  as  to  the  governing  law  of  the contract,  unless supported in that respect by the  rest  of the  contract and the surrounding circumstances.   Any  such clause must necessarily give way to stronger indications  in regard  to the intention of the parties.  See  The  Fehmarn, (1958) 1 All E.R. 333. ------------------------------------------------------------     Dicey’s sub-rule (2) of rule 180 reads :-     "Sub-rule  (2) - When the intention of the parties to  a     contract  with regard to the law governing the  contract

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   is  not  expressed in words, their intention  is  to  be     inferred from the terms and nature of the contract,  and     from  the  general circumstances of the case,  and  such     inferred  intention  determines the proper  law  of  the     contract."                                                     120       Where  the  parties have not  expressly  or  impliedly selected  the proper law, the courts impute an intention  by applying  the objective test to determine  what the  parties would  have  as  just and  reasonable  persons  intended  as regards  the applicable law had they applied their minds  to the  question. * The judge has to determine the  proper  law for the parties in such circumstances by putting himself  in the  place  of a "reasonable man". He has to  determine  the intention  of the parties by asking himself "how a just  and reasonable  person  would have regarded  the  problem",  The Assunzion  (1954)  P.  150,176 (CA);  Mount  Albert  Borough Council  v. Australasian Temperance and General Mutual  Life Assurance Society Ltd. (1938) A.C. 224, 240 (P.C.)      For this purpose the place where the contract was made, the   form  and  object  of  the  contract,  the  place   of performance,  the  place  of residence or  business  of  the parties, reference to the court having jurisdiction and such other  links  are examined by the courts  to  determine  the system of law with which the transaction has its closest and most real connection.      The  position  in these respects is summarised  by  the Privy   Council   in  Mount  Albert   Borough   Council   v. Australasian  Temperance and General Mutual  Life  Assurance Society, Limited, (1938) A.C.  224 at 240:-          "The  proper  law of the contract  means  that  law          which  the  English or other Court is to  apply  in          determining  the  obligations  under  the  contract          .....It  may be that the parties have in  terms  in          their  agreement expressed what law they intend  to          govern,   and  in  that  case  prima  facie   their          intention will be effectuated by the Court. But  in          most cases they do not do so.  The parties may  not          have thought of the matter at all.  Then the  Court          has to impute an intention, or to determine for the          parties  what is the proper law which, as just  and          reasonable  persons,  they  ought  or  would   have          intended  if  they had thought about  the  question          when they made the contract.....". ------------------------------------------------------------     Dicey’s sub-rule (3) of rule 180 reads :-     "Sub-rule  (3) - When the intention of the parties to  a     contract  with  regard to the law governing  it  is  not     expressed and cannot be inferred from the circumstances,     the contract is governed by the system of law with which     the   transaction   had  its  closest  and   most   real     connection."                                                        121      Proper  law  is  thus the law which  the  parties  have expressly  or impliedly chosen, or which is imputed to  them by  reason of its closest and most intimate connection  with the  contract.  It  must, however,  be  clarified  that  the expression ’proper law’ refers to the substantive principles of  the  domestic law of the chosen system and  not  to  its conflict of laws rules.  The law of contract is not affected by the doctrine of renvoi.  See Dicey, Vol. II, p.1164.      In a case such as the present, there is no need to draw any  inference  about  the intention of the  parties  or  to impute  any  intention to them, for they  have  clearly  and categorically stipulated that their contract, made in  India

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and the courts in Delhi are to ’have exclusive  jurisdiction in  all  matters arising under this contract’ (cl.  7)   The cardinal  test suggested by Dicey in rule 180 is thus  fully satisfied.      As  regards  the governing law  of  arbitration,  Dicey says :          "Rule    58-(1)    The   validity,    effect    and          interpretation  of  an  arbitration  agreement  are          governed by its proper law.          (2)  The law governing arbitration  proceedings  is          the  law chosen by the parties, or, in the  absence          of  agreement, the law of the country in which  the          arbitration is held." (Vol I, Pages 534-535).      The principle in rule 58, ass formulated by Dicey,  has two aspects (a) the law governing the arbitration agreement, namely,  its  proper  law; and  (b) the  law  governing  the conduct of the arbitration, namely, its procedural law.      The proper law of the arbitration agreement is normally the  same as the proper law of the contract.  It is only  in exceptional  cases that it is not so even where  the  proper law  of  the contract is expressly chosen  by  the  parties. Where,  however,  there  is no express  choice  of  the  law govening the  contract  as  a  whole,  or  the   arbitration agreement as such, a presumption may arise that  the law  of the  country where the arbitration is agreed to be  held  is the  proper law of the arbitration agreement.  But  that  is only  a rebuttable presumption.  See Dicey, Vol I,  p.  539; see the observation in Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd.,                                                        122 1970 AC 583, 607, 612 and 616)      The   validity,  effect  and  interpretation   of   the arbitration agreement are governed by its proper law.   Such law  will  decide  whether the arbitration  clause  is  wide enough  to cover the dispute between the parties.  Such  law will  also ordinarily decide whether the arbitration  clause binds  the  parties even when one of them alleges  that  the contract  is  void,  or voidable or  illegal  or  that  such contract  has been discharged by breach or frustration.  See Heyman  & Anr. v. Darwins, Ltd 1942 (1) All E.R.  337.   The proper  law  of  arbitration will also  decide  whether  the arbitration  clause  would  equally  apply  to  a  different contract  between the same parties or between one  of  those parties and a third party.      The  parties  have  the  freedom  to  choose  the   law governing an international commercial arbitration agreement. They   may   choose  the  substantive  law   governing   the arbitration   agreement  as  well  as  the  procedural   law governing  the conduct of the arbitration.  such  choice  is exercised  either expressly or by implication.  Where  there is  no express choice of the law governing the contact as  a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication a presumption that the  parties  have  intended  that the  proper  law  of  the contract  as  well  as the  law  governing  the  arbitration agreement  are the same as the law of the country  in  which the  arbitration is agreed to be held.  On the  other  hand, where the proper law of the contract is expressly chosen  by the  parties, as in the present case, such law must, in  the absence of an unmistakable intention to the contrary, govern the  arbitration  agreement  which,  though  collateral   or ancillary  to the main contract, is nevertheless a  part  of such contract.      Whereas, as stated above, the proper law of arbitration (i.e., the substantive law governing arbitration) determines

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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 or  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,                                                        123 expressly or 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 ICC Rules,  those  rules, being in many respect self-contained or self-regulating  and constituting  a contractual code of procedure,  will  govern the  conduct  of  the arbitration, except  insofar  as  they conflict  with the mandatory requirements of the proper  law of  arbitration,  or of the procedural law of  the  seat  of arbitration.   See  the  observation of Kerr,  LJ.  in  Bank Mellat  v.  Helliniki Techniki Sa., (1983) 3 All  E.R.  428. See also Craig, Park and Paulsson, International Chamber  of Commerce Arbitration, 2nd ed. (1990).  To such an extent the appropriate courts of the seat of arbitration, which in  the present  case  are the competent English courts,  will  have jurisdiction in respect of procedural matters concerning the conduct  of  arbitration.  But the overriding  principle  is that the courts of the country whose substantive 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 Mustil  & Boyd,  Commercial  Arbitration, 2nd ed.; Allen  Redfern  and Martin  Hunter, Law & Practice of  International  Commercial Arbitration,  1986;  Russel on Arbitration,  Twentieth  ed., 1982; Cheshire & North’s Private International Law, eleventh ed. (1987).      The  proper  law of the contract in  the  present  case being expressly stipulated to be the laws in force in  India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been  specifically accepted, and the parties not having chosen expressly or  by implication a law different from the Indian law in regard to the  agreement  contained  in the  arbitration  clause,  the proper law governing the arbitration agreement is indeed the law  in  force in India, and the competent  courts  of  this country must necessarily have jurisdiction over all  matters concerning arbitration.  Neither the rules of procedure  for the  conduct  of arbitration contractulally  chosen  by  the parties  (the ICC Rules) nor the mandatory  requirements  of the procedure followed in the courts of the country in which the  arbitration  is held can in any  manner  supersede  the overriding                                                        124 jurisdiction  and control of the Indian law and  the  Indian courts.

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    This  means, questions such as the jurisdiction of  the arbitrator  to decide a particular issue or the  continuance of  an  arbitration or the frustration  of  the  arbitration agreement,  its  validity,  effect and  interpretation   are determined exclusively by the proper law of the  arbitration agreement,  which, in the present case, is Indian Law.   The procedural  powers  and duties of the  arbitrators,  as  for example,  whether they must hear oral evidence, whether  the evidence of one party should be recorded necessarily in  the presence  of  the other party, whether there is a  right  of cross-examination of witnesses, the special requirements  of notice,  the  remedies available to a party  in  respect  of security  for  costs  or  for  discovery  etc.  are  matters regulated in accordance with the rules chosen by the parties to   the  extent  that  those  rules  are   applicable   and sufficient and are not repugnant to the requirements of  the procedural law and practice of the seat of arbitration.  The concept  of  party autonomy in  international  contracts  is respected  by  all  systems  of law so  far  as  it  is  not incompatible  with  the proper law of the  contract  or  the mandatory   procedural   rules  of  the  place   where   the arbitration  is  agreed to be conducted  or  any  overriding public policy.      The arbitration agreement contained in the  arbitration clause in a contract is often referred to as a collateral or ancillary contract in relation to the main contract of which it  forms  a part.  The repudiation or breach  of  the  main contract may not put an end to the arbitration clause  which might  still survive for measuring the claims arising out of the breach and for determining the mode of their settlement. See  Heyman & Anr. v. Darwins, Ltd., (1942) 1 All E.R.  337; Bremer  Vulkan Schiffbau Und Maschinenfabrik v. South  India Shipping  Corpn., (1981) 1 All E.R. 289.  See also Mustil  & Boyd, Commercial Arbitration, 2nd ed. (1989).      The arbitration agreement may provide that all disputes which  may  arise between the parties will  be  referred  to arbitration  or  it may provide that  a  particular  dispute between the parties will be submitted to the jurisdiction of a   particular  arbitrator.   The  arbitration  clause   may identify  the  arbitrator or arbitrators and  the  place  of arbitration or it may leave such matters to be determined by recourse  to the machinery of an institutional  arbitration, such  as  the  ICC, or the  London  Court  of  International Arbitration  or  the  American  Arbitration  Association  or similar institutions.                                                        125      Clause  27 of the General Terms of the  Contract  shows that it was the intention of the parties that disputes  with a  foreign contractor should be referred to  arbitration  in accordance with the ICC Rules; while disputes with an Indian contractor should be settled by arbitration in New Delhi  on an ad hoc basis.      The  ICC  Rules  are made  specifically  applicable  in respect of disputes with a foreign contractor because of the special nature of the contract.  One of the parties to  such a   contract  being  a  foreigner,  questions   of   private international   law   (or  conflict  of  laws)   may   arise particularly as regards arbitral proceedings conducted in  a foreign territory.  In respect of an Indian contractor,  the transaction  as well as the dispute settlement  process  are completely localised in India and in the Indian legal system and  there is no scope for interference by a foreign  system of law with the arbitral proceedings.      An  international  commercial  arbitration  necessarily involves  a foreign element giving rise to questions  as  to

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the choice of law and the jurisdiction of courts.  Unlike in the  case  of persons belonging to the  same  legal  system, contractual  relationships  between  persons  belonging   to different  legal  systems may give rise to  various  private international  law  questions such as the  identity  of  the applicable  law and the competent forum.  An award  rendered in  the  territory of a foreign State may be regarded  as  a domestic award in India where it is sought to be enforced by reason  of  Indian law being the proper  law  governing  the arbitration agreement in terms of which the award was  made. The   Foreign  Awards  Act,  incorporating  the   New   York Convention, leaves no room for doubt on the point.      The ICC Rules provide for settlement by arbitration  of business  dispute  of  an  international  character.    They furnish  an  institutionalised  procedure  of   arbitration. These  Rules  being a self-contained  or  a  self-regulating code,  they operate more or less independently  of  judicial interference in the conduct of arbitration, except in so far as  they  conflict with the mandatory  requirements  of  the governing system of the proper law or the procedural law  of the  place of arbitration.  Party-autonomy in  international business  is  thus  the  guiding  principle  of  the   self- regulating   mechanism   envisaged   by   the   Rules,   and interference  by  any Court  with  the  actual  conduct   of arbitration is to a large extent avoided.      The  difference  between an ad hoc arbitration  and  an institutional                                                        126 arbitration  is not a difference between one system  of  law and  another; for whichever is the proper law which  governs either  proceeding, it is merely a difference in the  method of appointment and conduct of arbitration.  Either method is applicable  to an international arbitration, but neither  is determinative  of  the  character of  the  resultant  award, namely,  whether  or not it is a foreign  award  as  defined under the Foreign Awards Act, 1961.      Where the  ICC Rules apply, there is  generally  little need to invoke the procedural machinery of any legal  system in  the actual conduct of arbitration.  These Rules  provide for   the  submission  of  request  for   arbitration,   the appointment   of   arbitrators,   challenge   against    the appointment, pleadings, procedure, selection of the place of arbitration, terms of reference, time limit for award, cost, finality   and  enforceability,  and  similar   matters   of procedure  (Article 11 of the ICC Rules).  The  parties  are free  under  the ICC Rules to determine the  law  which  the arbitrator shall apply to the merits of the dispute.  In the absence  of  any  stipulation  by  the  parties  as  to  the applicable law, the arbitrators may apply the law designated as  the proper law by the Rules of Conflict which they  deem to be appropriate (Article 13 of the ICC Rules).  These  and other  provisions  contained in the ICC Rules  make  them  a self-contained  and self-regulating system, but  subject  to the overriding powers of the appropriate national courts.*      A ’foreign award’, as defined under the Foreign  Awards Act,  1961  means an award made or on  after  11.10.1960  on differences   arising   between   persons   out   of   legal relationships,   whether  contractual  or  not,  which   are considered to be commercial under the law in force in India. To  qualify  as  a foreign award under the  Act,  the  award should  have  been  made in pursuance  of  an  agreement  in writing  for  arbitration  to be governed by  the  New  York convention  on  the Recognition and Enforcement  of  Foreign Arbitral Awards, 1958, and not to be governed by the law  of India.   Furthermore  such an award should  have  been  made

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outside  India  as  having made  reciprocal  provisions  for enforcement  of  the Convention.  These are  the  conditions which  must be satisfied to qualify an award as  a  ’foreign award’ (S.2 read with S.9). ------------------------------------------------------------     See ICC Rules of Arbitration, 1988; See also Craig, Park     and   Paulsson,   International  Chamber   of   Commerce     Arbitration, 2nd ed. (1990).                                                   127      An award is ’foreign’ not merely because it is made  in the territory of a foreign State, but because it is made  in such a territory on an arbitration agreement not governed by the law of India.  An award made on an arbitration agreement governed by the law of India, though rendered outside India, is  attracted  by the saving clause in S.9  of  the  Foreign Awards  Act  and is, therefore, not treated in  India  as  a ’foreign award’.      A ’foreign award’ is (subject to section 7)  recognised and  enforceable in India ’as if it were an award made on  a matter  referred  to arbitration in India’  (S.4).  Such  an award  will be ordered to be filed by a competent  court  in India  which will pronounce judgment according to the  award (S.6).      Section  7  of Foreign Awards Act, in  consonance  with Art. V of the New York Convention which is scheduled to  the Act,  specifies the conditions under which  recognition  and enforcement  of  a  foreign award will  be  refused  at  the request of a party against whom it is invoked.      A foreign award will not be enforced in India if it  is proved by the party against whom it is sought to be enforced that  the  parties  to the agreement  were,  under  the  law applicable to them, under some incapacity, or, the agreement was  not  valid  under the law to  which  the  parties  have subjected it, or, in the absence of any indication  thereon, under  the law of the place of arbitration; or there was  no due compliance with the rules of fair hearing; or the  award exceeded the scope of the submission to arbitration; or  the composition  of the arbitral authority or its procedure  was not  in  accordance with the agreement of the  parties,  or, failing  such agreement, was not in accordance with the  law of  the  place  of arbitration; or ’the award  has  not  yet become  binding  on the parties, or has been  set  aside  or suspended by a competent authority of the country in  which, of under the law of which, that award was made’.  The  award will not be enforced by a court in India if it is  satisfied that  the  subject  matter of the award is  not  capable  of settlement   by   arbitration  under  Indian  law   or   the enforcement of the award is contrary to the public policy.      The Foreign Awards Act contains a specific provision to exclude  its operation to what may be regarded as  ’domestic award’  in  the sense of the award having been  made  on  an arbitration agreement governed by the law of India, although the  dispute  was with a foreigner and the  arbitration  was held and the award was made in a foreign State.                                                        128      Section 9 of this Act says :-           "Nothing in this Act shall           (a) .................................           (b)  apply  to any award made  on  an  arbitration           agreement governed by the law of India."      Such  an award necessarily falls under the  Arbitration Act, 1940, and is amenable to the jurisdiction of the Indian Courts and controlled by the Indian system of law just as in the  case  of  any other domestic  award,  except  that  the proceedings  held  abroad and leading to the award  were  in

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certain  respects  amenable to be controlled by  the  public policy  and  the mandatory requirements of the  law  of  the place of arbitration and the competent courts of that place.      It is important to recall that in the instant case  the parties  have expressly stated that the laws  applicable  to the  contract would be the laws in force in India  and  that the  courts of Delhi would have exclusive  jurisdiction  ’in all matters arising under this contract’.  They have further stated that the ’Contract shall in all respects be construed and  governed  according to Indian laws’.  These  words  are wide  enough  to  engulf every question  arising  under  the contract including the disputes between the parties and  the mode of settlement.  It was in Delhi that the agreement  was executed.  The form of the agreement  is closely related  to the  system of law in India.  Various Indian enactments  are specifically mentioned in the agreement as applicable to  it in many respects.  The contract is to be performed in  India with  the aid of Indian workmen whose conditions of  service are  regulated  by Indian laws.  One of the parties  to  the contract  is a public sector undertaking.  The contract  has in  every respect the closest and most real connection  with the  Indian  system of law and it is by that  law  that  the parties  have expressly evinced their intention to be  bound in all respects.  The arbitration agreement is contained  in one  of the clauses of the contract, and not in  a  separate agreement.   In  the  absence  of  any  indication  to   the contrary,  the governing law of the contract (i.e.,  in  the words of Dicey, the proper law of the contract) being Indian law, it is that system of law which must necessarily  govern matters concerning arbitration, although in certain respects the  law of the place of arbitration may have its  relevance in regards to procedural matters.                                                        129      It  is  true  that  an  arbitration  agreement  may  be regarded as a collateral or ancillary contract in the  sense that it survives to determine the claims of the parties  and the  mode  of settlement of their disputes  even  after  the breach  or repudiation of the main contract.  But it is  not an independent contract, and it has no meaningful  existence except  in  relation to the rights and liabilities   of  the parties  under  the  main  contract.   It  is  a  procedural machinery  which  is activated when disputes  arise  between parties  regarding  their rights and liabilities.   The  law governing  such rights and liabilities is the proper law  of the  contract,  and  unless  otherwise  provided,  such  law governs   the  whole  contract  including  the   arbitration agreement, and particularly so when the latter is  contained not in a separate agreement, but, as in the present case, in one of the clauses of the main contract.      Significantly,  London  was  chosen  as  the  place  of arbitration  by reason of Article 12 of the ICC Rules  which reads :          "The  place  of arbitration shall be fixed  by  the          International  Court of Arbitration, unless  agreed          upon by the parties."      The  parties  had never expressed  their  intention  to choose London as the arbitral forum, but, in the absence  of any agreement on the question, London was chosen by the  ICC Court   as  the  place  of  arbitration.   London   has   no significant  connection  with the contract  or  the  parties except  that it is a neutral place and the Chairman  of  the Arbitral Tribunal is a resident there, the other two members being nationals of the United State and India respectively.      The  decisions relied on by counsel for the  Singer  do not  support  his contention that the mere  fact  of  London

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being the place of arbitration excluded the operation of the Arbitration Act, 1940 and the jurisdiction of the courts  in India.  In James Miller & Partners Ltd. v. Whitworth  Street Estates (Manchester) Ltd. (1970) AC 583, the parties had not expressly stated which law was to govern their contract.  On an analysis of the various factors, the House of Lords  held that  in  the  absence of any choice of  the  law  governing arbitration  proceedings,  those  proceedings  were  to   be considered  to be governed by the law of the place in  which the  arbitration was held, namely, Scotland because  it  was that system of law which was most closely connected with the proceedings.   Various  links with Scotland, which  was  the place  of performance of the contract,  unmistakably  showed that the arbitral proceedings were to be governed by the law of Scotland,                                                        130 although  the majority of the learned Law Lords (Lords  Reid Wilberforce dissenting on the point)  held that, taking into account certain other factors, the contract was governed  by English law.  That case is no authority for the  proposition that, even where the proper law of the contract is expressly stated  by the parties, and in the absence of  any  contrary indication,  a  different  law  governed  arbitration.   The observations  contained in that judgment do not support  the contention urged on behalf of the Singer that merely because London  was designated to be the place of  arbitration,  the law  which governed arbitration was different from  the  law expressly  chosen  by the parties as the proper law  of  the contract.      It  is  true that the procedural law of  the  place  of arbitration   and  the  courts  of  that  place  cannot   be altogether  excluded,  particularly in  respect  of  matters affecting public policy and other mandatory requirements  of the legal system of that place.  But in a proceeding such as the  present which is intended to be controlled by a set  of contractual rules which are self-sufficient and designed  to cover  every  step  of  the proceeding,  the  need  to  have recourse  to the municipal system of law and the  courts  of the  place of arbitration is reduced to the minimum and  the courts  of  that place are unlikely to  interfere  with  the arbitral  proceedings  except  in  cases  which  shock   the judicial  conscience.   See the observations of Kerr  LJ  in Bank Mellat v. Helliniki Techniki SA, (1983) 3 All E.R. 428.      Courts would give effect to the choice of a  procedural law other than the proper law of the contract only where the parties  had  agreed  that matters of  procedure  should  be governed  by a different system of law.  If the parties  had agreed that the proper law of the contract should be the law in force in India, but had also provided for arbitration  in a  foreign  country,  the laws of  India  would  undoubtedly govern  the  validity,  interpretation  and  effect  of  all clauses including the arbitration clause in the contract  as well  as the scope of the arbitrators’ jurisdiction.  It  is Indian  law  which  governs  the  contract,  including   the arbitration  clause, although in certain  respect  regarding the  conduct  of  the arbitration  proceedings  the  foreign procedural law and the competent courts of that country  may have a certain measure of control.  See the principle stated by Lord Denning, M.R. in International Tank and Pipe SAK  v. Kuwait Aviation Fueling Co. KSC, (1975) 1 All E.R. 242.      The arbitration clause must be considered together with the rest of                                                        131 the contract and the relevant surrounding circumstances.  In the present case, as seen above, the choice of the place  of

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arbitration was, as far as the parties are concerned, merely accidental  in  so  far   as  they  had  not  expressed  any intention in regard to it and the choice was made by the ICC Court  for reasons totally unconnected with either party  to the  contract.  On the other hand, apart from the  expressly stated  intention  of  the  parties,  the  contract  itself, including the arbitration agreement contained in one of  its clauses,  is  redolent  of India and  matters  Indian.   The disputes  between  the parties under the  contract  have  no connection with anything English, and they have the  closest connection with Indian laws, rules and regulations.  In  the circumstances,  the mere fact that the venue chosen  by  the ICC Court for the conduct of arbitration is London does  not support the case of the Singer on the point.  Any attempt to exclude  the  jurisdiction of the competent courts  and  the laws  in  force in India is totally  inconsistent  with  the agreement between the parties.      In sum, it may be stated that the law expressly  chosen by the parties in respect of all matters arising under their contract,  which  must  necessarily  include  the  agreement contained  in the arbitration clause, being Indian  law  and the  exclusive  jurisdiction of the courts in  Delhi  having been expressly recognised by the parties to the contract  in all  matters arising under it, and the contract  being  most intimately   associated  with  India,  the  proper  law   of arbitration  and the competent courts are  both  exclusively Indian,  while  matters  of  procedure  connected  with  the conduct  of  arbitration  are left to be  regulated  by  the contractually  chosen  rules of the ICC to the  extent  that such  rules are not in conflict with the public  policy  and the mandatory requirements of the proper law and of the  law of  the place of arbitration.  The Foreign Awards Act,  1961 has  no application to the award in question which has  been made  on  an arbitration agreement governed by  the  law  of India.      The Tribunal has rightly held that the ’substantive law of  the contract is Indian law’.  The Tribunal  has  further held  ’the laws of England govern procedural matters in  the arbitration’.      All  substantive  rights arising  under  the  agreement including that which is contained in the arbitration  clause are, in our view, governed by the laws of India.  In respect of the actual conduct of arbitration, the procedural law  of England may be applicable to the extent that the ICC                                                        132 Rules are insufficient or repugnant to the public policy  or other mandatory provisions of the laws in force in  England. Nevertheless,  the jurisdiction exercisable by  the  English courts and the applicability of the laws of that country  in procedural   matters  must  be  viewed  as  concurrent   and consistent  with  the jurisdiction of the  competent  Indian courts  and  the  operation of Indian laws  in  all  matters concerning  arbitration  in so far as the main  contract  as well  as that which is contained in the  arbitration  clause are governed by the laws of India.      The Delhi High Court was wrong in treating the award in question  as a foreign award.  The  Foreign Awards Act,  has no  application  to  the award by  reason  of  the  specific exclusion contained in Section 9 of that Act.  The award  is governed  by  the  laws in force  in  India,  including  the Arbitration  Act,  1940.   Accordingly,  we  set  aside  the impugned  judgment of the Delhi High Court and  direct  that Court to consider the appellant’s application on the  merits in   regard  to which we express no views  whatsoever.   The appeal  is allowed in the above terms.  We do not,  however,

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make any order as to costs. G.N.                               Appeal allowed.                                                        133