In Trammo DMCC v Nagarjuna Fertilizers and Chemicals Limited(1) the Bombay High Court ruled that an application under Section 9 of the Arbitration and Conciliation Act 1996 which had been filed following an award passed by a foreign-seated arbitral tribunal had to be brought before a 'court' as defined in the explanation to Section 47 rather than Section 2(1)(e)(ii) of the act.
This update attempts to analyse the Trammo decision.
Section 2(1)(e)(ii) defines a 'court' as follows:(2)
"(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court." (Emphasis added.)
The proviso to Section 2(2) allows an Indian court to grant interim relief even in the case of foreign-seated international commercial arbitration, subject to an agreement to the contrary between the parties.
Further, the explanation to Section 47(3) of the act defines 'court' as follows:
"Explanation—In this section and in the sections following in this Chapter, "Court" means the High Court having original jurisdiction to decide the questions forming the subject-matter of the arbitral award if the same had been the subject-matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court." (Emphasis added.)
Section 9 of the act provides as follows:
"Interim measures etc. by Court— [(1)] A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court."
In Trammo the court was asked to decide which court had jurisdiction to entertain a petition under Section 9 following an award rendered by a foreign-seated arbitral tribunal. In light of the facts of this case, Trammo's Section 9 petition was moved before the Bombay High Court to ensure that it was within the local limits of the jurisdiction in which the bank accounts of the award debtor were located (ie, the petition was moved according to the definition of court under the explanation to Section 47). Admittedly, no cause of action or any other question forming the subject matter of the arbitration arose within the territorial jurisdiction of the Bombay High Court.
The principle of 'purposive construction' was applied by the court and it was held that a Section 9 petition filed after passing a foreign award would lie before a court, as set out in the explanation to Section 47. The Bombay High Court held that any other interpretation would restrict the award holder's right to seek interim relief from a court under whose jurisdiction the subject matter of the award may lie.(4)
In Trammo the court also considered the contextual meaning of the words "[i]n this Part, unless the context otherwise requires" at the beginning of Section 2 and held that there would be no difficulty in invoking the jurisdiction of an enforcing court in relation to an application for interim relief under Section 9. According to the court, once an arbitral award has been rendered, its enforcement is in itself the relevant cause of action.
The court therefore held that once a foreign arbitral award has been passed, the jurisdiction of the court would be determined based on the definition of court provided in the explanation to Section 47 of the act.
The judgment in Trammo appears to be progressive but goes against express statutory language. In particular, the act does not envisage that a Section 9 petition in the context of a foreign-seated arbitration would lie in different courts based on the stage of arbitration. In terms of this judgment, a Section 9 petition in a foreign-seated arbitration would lie:
- before a court as defined under Section 2(1)(e)(ii) before the foreign award is passed; and
- before a court as defined under the explanation to Section 47 after the foreign award is passed.
This is not specifically stated in the act.
A conjoint reading of Sections 2, 9 and the explanation to Section 47 shows that the act does not envisage conferring jurisdiction to entertain a Section 9 petition based on the stage of the foreign arbitration.
Further, the opening words of the explanation to Section 47 (ie, "in this section and in the section following in the chapter") also show that the legislature intended to vest the jurisdiction to entertain a Section 9 petition on a court as defined under Section 2(1)(e)(ii) of the act.
Unlike what the court has held, had the intention of the legislature been such, it would have specifically stated so while making sweeping amendments to the act in 2015.
The Trammo judgment has nevertheless clarified, and to a large extent simplified, the procedure for a foreign award holder. It will be interesting to note the legal position other high courts and the Supreme Court take, if and when faced with a similar legal issue. Until such time, the Trammo judgment will hold the field.
For further information on this topic please contact Rajat Jariwal at Khaitan & Co by telephone (+91 11 4151 5454) or email ([email protected] or [email protected]). The Khaitan & Co website can be accessed at www.khaitanco.com.
Endnotes
(2) Section 2(1)(e)(ii) falls under Part II of the act, setting out general provisions on domestic arbitration.
(3) Section 47 falls under Part II of the act, setting out provisions on enforcement of a foreign award.
"Now the question remains is 'whether section 2(1)(e)(ii) when it defines 'court' to mean the High Court having jurisdiction to decide the question forming the subject matter of the arbitration would create any impediment preventing the petitioner to invoke Section 9 before this Court. In my opinion, a cumulative reading of the amended provisions would not create such a hurdle for the petitioner to invoke the jurisdiction of this Court and maintain this petition. The reason being that Section 2 the definition clause begins with the words 'In this Part, unless the context otherwise requires-'. The definition of 'Court' as contained in Section 2(1)(e)(ii), in the present context would create a incongruity to enforce the provisions Section 9 of the Act as made applicable by the 2015 Amendment Act. This inasmuch as the petitioner would be prevented to seek interim measures in enforcing the money award, when the money is lying within the territorial jurisdiction of the Courts only for the reason that it is not the subject matter of arbitration. This is opposed to the plain and clear intention of the legislature as incorporated by the 2015 Amendment Act as noted above. It cannot be conceived that on the one hand the legislature permits a party holding a foreign award to invoke Section 9 of the Act and further permit invoking of the provisions of Sections 47 to 49 of the Act to enforce the foreign awards, and for that matter to approach the appropriate court having jurisdiction to decide the question forming the subject matter of arbitral award, as if the same had been the subject matter of the suit as the explanation to Section 47 would provide. However, on the other hand at the same time, when it comes to adopting proceedings under Section 9 to secure the sums awarded being the money to secure the award is available within the jurisdiction of the Court, it would render the Court lacking such jurisdiction by application of Section 2(1)(e)(ii). This is surely not the intention of the legislature. Any interpretation which would defeat the intention of the legislature is required to be avoided. Thus, in my opinion, considering the amended provisions and in the facts of the present case when the petitioner is holding a foreign award and when the money is available within the jurisdiction of this Court as contained in the bank accounts of the respondent at Mumbai, the principles of 'contextual interpretation' of Section 2(1)(e)(ii) would be required to be adopted considering the opening words of Section 2(1) 'In this Part, unless the context otherwise requires—' and adverting to this principle of interpretation it would be required to be held that the 'Court' as defined under the explanation to Section 47, would be the appropriate court when the petitioner is seeking interim reliefs under Section 9 of the Act pending the enforcement of the foreign award."
In Trammo DMCC v Nagarjuna Fertilizers and Chemicals Limited(1) the Bombay High Court ruled that an application under Section 9 of the Arbitration and Conciliation Act 1996 which had been filed following an award passed by a foreign-seated arbitral tribunal had to be brought before a 'court' as defined i
