Service of Notice on Parties to an Indian Arbitration

In Benarsi Krishna v Karmayogi Shelters, the Supreme Court has decided that the word “party” in section 34 of the Arbitration and Conciliation Act, 1996, does not include a party’s agent. This, it is respectfully submitted, is incorrect or, at best, too widely stated. The important practical consequence of this proposition is that the period of limitation does not begin to run from the date of service on counsel. Since it is well-known that a Court has no power to condone a delay beyond the limit imposed by section 34 and its proviso, the exact date on which the period of limitation begins to run is of immense significance in arbitration law.

First, the facts: the claimant in the arbitration instituted proceedings for the breach of a collaboration agreement and obtained a successful award from a single arbitrator. This award was served on counsel for the respondent on 13 May, 2004. An application was filed to set aside this award on 3 February, 2005—plainly time-barred, if the date of receipt of the award was the 13^th of May. Accordingly, a single judge of the Delhi High Court dismissed the petition. The Division Bench set aside this order, relying on the judgment of the Supreme Court in Union of India v Tecco Trichy Engineers, on the basis that service of the award had not been properly effected.

In considering this problem, it is important to carefully distinguish between two arguments: first, that the word “party” in section 34 excludes agents; and second, counsel has neither actual nor apparent authority to accept service. The first is a point of statutory construction, but the second calls for the application of well-known (if contentious) principles of the law of agency. The Supreme Court has, with respect unfortunately, accepted the first submission. In other words, it has held that the word “party” is defined as one who is party to an arbitration agreement and, as a matter of construction, does not include counsel. The following observations of the Court should be studied closely:

The expression "party" has been amply dealt with in Tecco Trechy Engineer's case (supra) and also in ARK Builders Pvt. Ltd.'s case (supra), referred to hereinabove. It is one thing for an Advocate to act and plead on behalf of a party in a proceeding and it is another for an Advocate to act as the party himself. The expression "party", as defined in Section 2(h) of the 1996 Act, clearly indicates a person who is a party to an arbitration agreement. The said definition is not qualified in any way so as to include the agent of the party to such agreement. Any reference, therefore, made in Section 31(5) and Section 34(2) of the 1996 Act can only mean the party himself and not his or her agent, or Advocate empowered to act on the basis of a Vakalatnama.

[emphasis mine]

With respect, it is submitted that this conclusion contains two errors. The first is the contrast between an Advocate acting “for” the party and an Advocate acting “as” the party. This is a distinction without a difference unless one concludes that the word “party” in section 34 contemplates personal service—which was the issue before the Court. In other words, the first reason cannot be a reason for the conclusion that the word “party” excludes agents: it begs the question. The second reason given is that the word “party” is not qualified by Parliament to exclude agents. This, with respect, is a questionable proposition of law: the general rule of law is that a principal is bound by the acts of an agent and, with in relation to notice requirements, has been codified in the Companies Act and the Code of Civil Procedure. It is difficult to imagine that the Court intended every use of the word “party” in the Arbitration Act to refer to the party excluding its agents and yet the language in which its conclusion is expressed makes it difficult to resist this inference. Nor is this a surprising rule: when banks, for example, pay our electricity bill in accordance with a standing instruction, our debt to the Electricity Department is discharged because the law of agency treats the bank as our agent in relation to third parties, although it is our debtor with respect to the money it holds. For the same reason, a payment to our bank discharges a debt owed by any third party to us: the bank is our collecting agent. If a statute used the word “party” or “person” and defined certain legal consequences, it is therefore difficult to suppose that the word was intended to exclude agents.

In addition, one is bound to ask: what of legal entities? It is well-established law that a company acts through the deeds of human beings some of which are treated, by primary or secondary or other rules of attribution, as the acts of the company. In an outstanding judgment in Meridian Global, Lord Hoffmann explained that it is therefore misleading to talk of the company in anthropomorphic terms: the correct analysis is that the acts of certain persons are treated as the acts of the company by virtue of rules of law. These rules of law include rules of attribution and rules of agency. It is, in other words, impossible for a company to act (in the eyes of law) except through the acts of human beings whose acts are, by virtue of applicable rules of law, treated as its acts. It is difficult to reconcile this with the Supreme Court’s conclusion that service on the “party” excludes service on its agents. No doubt it will be suggested that there is a difference between “external agents” (like lawyers) and the company’s own agents (like the legal manager or CEO). That suggestion would be incorrect, because there is no difference at all in the eye of the law between external agents and internal agents: both are agents, albeit constituted differently and with different levels of authority.

The question, ultimately, is not whether the word “party” can include agents, for it plainly does, but whether the agent had authority to accept service. The authority of solicitors and counsel has always proved troublesome, generally in the context of settlement: in Waugh v HB Clifford and Sons [1982] 1 Ch 374, the defendant builder, who had instructed solicitors to settle a dispute with his customers by purchasing their houses, withdrew those instructions and told them not to settle. Unfortunately, this information did not reach the solicitor handling the case until after he had (subject to the question of authority) concluded a binding contract of settlement. Brightman LJ held that a solicitor have apparent authority to settle a dispute provided the terms of the settlement do not involve anything “collateral” to the dispute for which he was instructed. This, with one exception, echoes the analysis of a leading Indian decision: Surendra Nath v Tarubala Basi AIR 1930 PC 158, where the Privy Council held that a counsel has implied and apparent authority (arising from knowledge of implied authority) to compromise suits, but expressly declined to rule on whether this is the case where the agency is created by a written instrument, such as a vakalatnama.

The important question in this case—which was unfortunately not decided—was the scope of a counsel’s authority to accept service of an award. The question falls to be decided by asking the two usual questions: was there actual express/implied authority? If so, the matter ends there. If not, was there apparent authority? This would ordinarily arise from the existence of implied authority but would exist even if the implied authority did not exist in the particular case (for example, because of a prohibition not communicated to a third party). The added complication is the question of whether the claimant in the arbitration is entitled to ostensible authority with respect to an award sent to the defendant’s counsel by the arbitral tribunal, and whether authority, if any, exists after the arbitration is concluded. The Court records that one of these contentions was raised, but did not, in the result, have to rule on any because of the view it took on the meaning of the language of section 34(4).

The final point that should be made is about the reliance on Tecco Trichy: that was a case in which Lahoti CJ held that service on an unknown clerk in a large Government office does not constitute effective service. This conclusion can be ascribed to the traditional authority-based reasoning: such an employee is unlikely to have actual or ostensible authority to accept service. It should not be treated as authority for the general proposition that service excludes all agents, whatever their authority.

The Supreme Court overrules Bhatia International and Venture Global

The Supreme Court has overruled Bhatia International, and has once and for all held that the supposed omission of the word “only” from section 2(2) has no significance (see below). Importantly, it has also held that a party cannot file a civil suit in relation to the subject matter of the arbitration agreement in order to obtain interim relief. The Court has overruled these decisions prospectively, that is, the law declared today will apply only to arbitration agreements made (not suits/petitions filed) after 06.09.2012. This means that any application for relief under sections 9 or 34 in respect of foreign-seated arbitrations will continue to be governed by the old law (including the law on implied exclusion) if existing arbitration agreements are not amended.

For a summary of the issues before the Court, readers may wish to refer to our account of the judgments of the High Courts under appeal. In today’s judgment, delivered by Nijjar, J. on behalf of the Constitution Bench, the Court has made several important observations on these and other issues of Indian arbitration law. The following summary briefly describes these observations, with a reference to the paragraph number. We will have an opportunity to comment in more detail in the days to come.

1. Section 2(2) and the reasoning in Bhatia International
1. The omission of the word “only” does not mean that Parliament intended to make Part I applicable to foreign-seated arbitrations. The reason for the omission is explained by the 330^th Meeting of the drafters of the Model Law on 19 June 1985. The reason is that article 1(2) of the Model Law had the words “except articles 8, 9, 35 and 36”, and therefore had to insert the word “only” to clarify that these provisions would apply also to domestic arbitrations (Para 63, 68).
2. Section 2(2) does not conflict with section 2(4) or with section 2(5). Section 2(5) only means that the Act applies to all arbitrations where it would be otherwise applicable (Para 85).
3. The proviso to s 1(2), in relation to Jammu & Kashmir, does not mean that the Act has extra-territorial application. It simply provides for the application of the J&K law (Para 55)
4. There is no “lacuna” in the Act therefore not applying to non-Convention awards. Such awards cannot be enforced under Part I (Para 175)
2. Section 2(7), which uses the words “domestic award”, contrasts domestic award with foreign award, not international award; that is, an international commercial arbitration in India is not a foreign award. This in fact indicates that Bhatia International was wrongly decided (paras 88 and 94).
3. In international arbitration, jurisdiction is generally determined by the “seat” of arbitration. The “seat” is a juridical concept, which is not affected by where hearings are conducted (Paras 72 and 100). In the rare case where the parties choose a seat of arbitration and a lex arbitri which do not coincide, it is a matter of construction whether the designation of the foreign seat was in fact a reference to the place of arbitration.
4. The two “alternatives” in section 48(1)(e), ie the court of the country in which the award was made (the country of the seat) and the court of the country under the law of which the award was made do not confer concurrent jurisdiction. The legislative history of art V(1)(e) of the NY Convention shows that the objective was to provide for the second alternative where the first alternative is unavailable (ie, where the country of the seat does not entertain a challenge to the award). Further, section 48 does not confer jurisdiction to set aside an award: such jurisdiction must be found in the applicable national law. Section 48 merely provides that a domestic court may decline to enforce an award if the conditions in the provision are satisfied. In any event, the words “under the law of which” are a reference to the lex arbitri, not the law governing the substance of the agreement (Paras 137, 148).
5. Parts I and II are mutually exclusive. The Indian Act, like the UNCITRAL Model Law, is founded on the “territoriality principle”. Therefore, Sections 9 and 34 of the Act apply only if the seat of arbitration is in India. This does not render a party seeking interim relief remediless. Even if it does, that is a matter for the legislature, not the courts (Para 167).
6. No civil suit can be instituted purely for interim relief, because interim relief is granted on the strength of the final relief sought on a recognised cause of action. The prayer for interim relief cannot itself constitute the cause of action for a suit (Paras 187, 197)

The Delhi High Court on Foreign Awards and Implied Exclusion of Section 34

We have discussed on several occasions the scope of the proposition in paragraph 32 of Bhatia International that the parties may “expressly or impliedly” exclude the applicability of Part I of the Arbitration Act in cases in which it would be otherwise applicable. The Court has previously held that Part I is not impliedly excluded merely by choosing a foreign substantive law (Indtel Technical Servicesand Citation Infowares), but may be if it is coupled with the designation of a foreign seat of arbitration (Dozco India v Doosan), or if the parties expressly choose a foreign seat and a foreign lex arbitri (Videocon). The Court appears also to have impliedly rejected the proposition that the mere designation of a foreign seat of arbitration excludes Part I, because the seat in Bhatia International was Paris, and the seat in Yograj was Kuala Lumpur. Even if Bhatia can be explained on the basis that the Court relied on the language of article 23(2) of the ICC Rules, Yograj clearly found that it was the application of Rule 32 of the SIAC Rules 2007 that excluded the Indian Act, suggesting that the designation of Singapore as the seat did not of itself lead to this result.

Muralidhar, J. last week considered these issues in Indiabulls Financial Services v Amaprop Ltd. In 2005, Amaprop invested in the shares of a subsidiary company of Indiabulls and was granted a Put Option enabling it to compel Indiabulls to acquire those shares at a predetermined price. The contract contained the following provisions on governing law and dispute resolution: (a) the contract is to governed by New York law, with an exclusion of renvoi (Section 12.10(a)); (b) each party accepted the non-exclusive jurisdiction of the courts in New York (Section 12.10(b)) and (c) all disputes shall be settled by arbitration in New York in accordance with the Rules of the American Arbitration Association, without prejudice to the right of any party to make an application for injunctive relief (Section 12.11).

Amaprop exercised the Put Option in 2010 at the predetermined price, but an application filed by Indiabulls with RBI to make the transfer at this price was refused. Amaprop commenced arbitration under the contract. The Tribunal’s award directed Indiabulls to make a fresh application to the RBI to transfer at a certain price, and left open the possibility that the difference between the option at the RBI-permitted price and the Option Price would form the basis of a money award for Amaprop. Amaprop brought an action in New York to confirm the award and obtained an anti-suit injunction in respect of Indian proceedings.

Thereafter an application was filed by Indiabulls under section 34 to set aside the New York award on the ground that it was contrary to Indian public policy in ignoring the provisions of the Foreign Exchange Management Act, 2000 and RBI Circulars. Amaprop took a preliminary objection on the basis that the parties had impliedly excluded the application of Part I of the Indian Act.

There is a strong case for the view that Bhatia International itself requires reconsideration, and that the selection of a foreign seat is the clearest indication that the parties intended to exclude Part I – but these points are concluded by authority and will remain so unless the Supreme Court overrules Bhatia International and Venture Global in BALCO. Therefore the analysis is whether, as a matter of construction, it can be said that the parties intended that Part I of the Indian Act should not apply. At first sight, there is little to suggest this, beyond the selection of a foreign seat of arbitration and a foreign proper law, and Supreme Court authority in Yograj and perhaps Bhatia itself suggests that that does not suffice. There is, of course, Dozco v Doosan, since the parties here also chose a foreign proper law.

Muralidhar, J. reaches the conclusion that Part I was excluded on a different basis. First, the learned judge rejects the suggestion that giving the New York courts non-exclusive jurisdiction indicates that the parties did not intend to exclude the jurisdiction of the Indian court. For this purpose, the Court cites the well-known decision of the Court of Appeal in Deutsche Bank v Highland Crusader. However, the context in which that case was decided was the prior decision of the Court of Appeal in Sabah Shipyard v Government of Pakistan, where the court had granted an anti-suit injunction restraining certain proceedings in Pakistan even though England was the subject of a non-exclusive jurisdiction clause. Sabah was subsequently criticised, notably by Mr Rapahel, and in Deutsche Bank, Toulson LJ explained that the conclusion in that case was correct only because it could be shown, independently, that commencing proceedings in Pakistan was vexatious and oppressive. Although there is an observation in that case that bringing proceedings in a certain forum may be vexatious or oppressive even if the chosen forum was given only non-exclusive jurisdiction, the thrust of the Court’s analysis was in fact that such a finding is unusual and requires material independent of the jurisdiction clause. To the extent the Delhi High Court relies on this case to hold that giving New York non-exclusive jurisdiction is not inconsistent with excluding the jurisdiction of the Indian court, it may be correct, but it can go no further.

Secondly, Muralidhar, J. held that the contract itself indicates that the intention of the parties was that an arbitral award would be tested only in a New York court, because of the reference to the New York court in section 12.10 and the conduct of the parties when proceedings were commenced in New York. Thirdly, the Court refers to the fact that New York was the seat of arbitration, and to Rule 57(2) of Dicey and Morris, which, of course, is the correct analysis but may be contrary to what the Supreme Court has held in NTPC v Singer and Bhatia International.

Two other points are of interest. The first is the finding that it was open to Indiabulls to raise non-compliance with Indian law in the New York court under the rubric of public policy. It is not clear if this is possible, because it is ordinarily accepted public policy in the New York Convention is a reference to the public policy of the enforcing State. The second is that this case appears to implicitly accept that parties can impliedly exclude certain provisions in Part I without excluding the remainder. That is because section 9 would not have been impliedly excluded in this case, since section 12.11 of the contract allowed the parties to approach other courts for interim relief – and yet, section 34 was.

The Proviso, Public Interest and Section 391

In Re Subhiksha Trading Services Ltd [161 CompCas 454], a single judge of the Madras High Court has considered a number of important questions relating to the role of the Company Court in sanctioning a scheme of arrangement or amalgamation under sections 391-4 of the Companies Act. Subhiksha Trading Services Ltd. [“STS”], the transferor company, was engaged in the business of trading in articles, operating retail stores etc. and sought the sanction of the Court to amalgamate with Blue Green Constructions and Investments Ltd. [“BGCI”], the transferee company. Of the many issues considered in the judgment, four* are especially important: (i) whether shareholders or creditors who consent to a scheme at a meeting are nevertheless entitled to raise an objection at the stage of sanction; (ii) the scope of the obligation of the transferor company to submit “latest” financial statements etc. under the proviso to section 391; (iii) whether it is open to a company in dire financial straits to apply for a scheme and (iv) role of the Company Court under section 391 and in particular the significance of public interest considerations.

As Ramasubramanian J. points out, the Petition, on the face of it, was perfectly consistent with section 391 and reasonable, for it was said that the amalgamation would permit economies of scale since both companies were engaged in the same line of business. At separate meetings ordered by the Court, the shareholders and secured creditors unanimously consented to the scheme. Neither the Regional Director nor the Official Liquidator raised any objection. Yet, the single judge permitted the secured creditors and members who had consented to resile from that position, and eventually dismissed the petition. It is submitted that the decision, which contains a valuable account of the law on these points, is correct.

The ground on which the secured creditors who had consented sought to nevertheless raise objections was that it had come to their attention that the transferor company’s financial position was beyond repair; that all of its shops had been closed and that it was effectively insolvent; that there were irregularities in the manner in which the promoters conducted the business etc. Since the creditors failed to establish misrepresentation or fraud, it became necessary to decide more generally whether it was open to them to withdraw consent. It was held that they can, because it is implicit in the judgment of the Supreme Court in Miheer Mafatlal that principles of contract law do not apply stricto sensu to a scheme. In particular, the Court reasoned that since it cannot sanction a scheme even if there is unanimity unless it is in the public interest and not manifestly unreasonable, a creditor is not foreclosed by his prior act of consent from raising issues that address these points:

… the grant of consent by itself, does not always ensure the seal of approval, since the Scheme has to pass through the other two check posts, before it is allowed to reach its destination. In The Calicut Bank Ltd. (in liquidation) v. Devani Ammal …, a Division Bench of this Court pointed out two things, viz., (i) that if there was misrepresentation, the consent given by the shareholders and the creditors, would be of no avail; and (ii) that if the company is hopelessly insolvent and the Scheme confers no apparent benefit on anyone, the Scheme cannot be accepted, even if the resolutions of shareholders and creditors had been passed after a disclosure of the true position. Therefore, the grant of consent by itself, would not ensure free passage through all check posts

Turning to consider the objections on the merits, the single judge examined the scope of the obligation on the company under the proviso to section 391 to disclose “all material facts…such as the latest financial position…and the like”. Since company petitions in High Courts routinely take two years or more to be allowed or dismissed, the question has arisen whether the obligation to furnish the latest financial position refers to the date of the application or the date of the final hearing. In Re Blue Star Ltd, the Bombay High Court endorsed the former view but the same Court in SBI v Alstom Power Boilers took the contrary view. Other High Courts took a middle path by holding that while the obligation of the company is to disclose financial statements as on the date of the petition, the Court is entitled to direct it to produce more recent statements at the time of final hearing (see Re Magnaquest Solutions Ltd). A reference to the Report of Daphtary-Sastri Committee, pursuant to which the proviso was inserted, made it clear, however, that the reference was to information available on the date of the petition. The single judge accepted this interpretation (¶117) but held that the Company Court is entitled to call for additional information should there be a material change in circumstances.

The Court further held that while the fact that a company is “hopelessly insolvent” is a relevant factor in judging the merits of a scheme, there is no bar on such a company preferring a scheme, because section 391 is not only intended not only “to enable healthy companies to re-arrange their affairs, but also to help unhealthy and sick ones to recover and recoup”. If, however, the scheme would cause detriment to the shareholders or the creditors or the public on account of that financial position, the scheme will not be sanctioned.

On the role of the Company Court, Ramasubramanian J. held that a scheme contrary to public interest cannot be sanctioned even if it commands a majority (“I do not think that the role of the Company Court examining a Scheme is merely akin to the role of an Appeal Examiner in the Registry of a Court”). The judge referred with approval to the decision of the Bombay High Court in JS Davar v Marathe in which Chandrachud C.J. had held that sanction will not be given if the “arrangement cannot reasonably be supposed by sensible business people to be for the benefit of the class which they represent”. The Court concluded that the scheme in question was contrary to public interest because it represented an attempt by a failed company to raise funds from the public when every other avenue had failed, and by creating artificial contractual penalties should the scheme fail, in order to strengthen the case for allowing it. Despite, therefore, the consent of the authorities and the unanimity of the shareholders and creditors in the first instance, the scheme was rejected.

* Some of the other issues that are of importance are whether the court under section 391 is bound by the quorum requirement in the articles or in the Act in ordering a meeting; and the applicability of a provision in the Listing Agreement requiring fair valuation of shares.

The Role of the Seat of Arbitration in Implied Exclusion

It is becoming increasingly difficult to state with confidence the prevailing position of law in India on a question that should, in principle, have a straightforward answer: in what circumstances will the Indian courts decline to exercise jurisdiction under the Arbitration and Conciliation Act, 1996 [“A and C Act”] and what must a contracting party which wishes to achieve this result insert in its agreement? The Supreme Court's judgment last month in Yograj Infrastructure v Ssang Yong Engineering has added to the difficulty.

Before attempting an account of the effect of this decision on the law, it may be helpful to briefly recapitulate. As we have previously discussed, this controversy revolves around what suffices to trigger the “implied exclusion” of Part I of the A and C Act which the Supreme Court accepted in paragraph 32 of Bhatia International. So far, five possibilities have been put to the Supreme Court: (i) the designation of a foreign proper law but no designation of a seat of arbitration; (ii) the designation of a foreign proper law and a foreign seat of arbitration, with or without the further designation of a foreign lex arbitri; (iii) the designation of a foreign seat of arbitration, Indian proper law and a foreign lex arbitri (iv) the same as case (iii) but with a foreign law governing the arbitration agreement, as opposed to the arbitration itself; and (v) the designation of foreign seat of arbitration simpliciter. The Supreme Court has held that Part I of the Indian Act is excluded in cases (ii), (iii) (Dosco v Doozan; Hardy Oil) and (perhaps) (iv) (Videocon v Union of India); and that it is not excluded in case (i) (Indtel Technical Services; Citation Infowares v Equinox). The contention that the lex arbitri is “presumed” to follow the designation of a foreign proper law was rejected in the decisions cited for case (i).

In Ssang Yong,* the respondent (Ssang Yong) was awarded a contract by the NHAI which it sub-contracted to Yograj [“the Agreement”]. The Agreement provided in clause 28 that it would be governed by the laws of India, and clause 27, the arbitration clause, read as follows:

27.1 All disputes, differences arising out of or in connection with the Agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules as in force at the time of signing of this Agreement. The arbitration shall be final and binding.

27.2 The arbitration shall take place in Singapore and be conducted in English language.

27.3 None of the Party shall be entitled to suspend the performance of the Agreement merely by reason of a dispute and/or a dispute referred to arbitration.  

In accordance with the Agreement, Yograj furnished a Performance Bank Guarantee in 2006, and commenced work. However, on account of disputes that subsequently arose, Ssang terminated the Agreement on 22 September, 2009. Both Yograj and Ssang filed applications for interim relief before the District Judge in Madhya Pradesh, and subsequently, the dispute was referred to SIAC arbitration. Once again, Yograj and Ssang filed applications for interim relief, and the arbitrator’s order directed Yograj to inter alia release plant, machinery and equipment for Ssang’s use. Yograj challenged this order before the District Judge in Madhya Pradesh purportedly under section 37(2)(b) of the A and C Act, and the question arose whether such an application is maintainable.

The Supreme Court held that Part I of the Act is impliedly excluded. In short, the Court gave two reasons: first, that the designation of Indian proper law is, in principle, sufficient to permit the inference that Indian law of arbitration (ie the A and C Act) applies, but secondly, that the designation of SIAC Rules as the “curial law” excludes Part I of the A and C Act because Rule 32 of the SIAC Rules provides that the law of arbitration for an arbitration under the SIAC Rules shall be the Singapore International Arbitration Act, 2002.

In discussing the first issue, the Court began by noting that the question it had to answer was “what would be the law on the basis of which arbitral proceedings would be conducted”, and relied on Clause 28 above to hold that the governing law of the arbitration agreement is the A and C Act. The observations the Court made immediately after this finding are of crucial importance, and therefore set out in full:

The learned Counsel for the parties have quite correctly spelt out the distinction between the "proper law" of the contract and the "curial law" to determine the law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well-settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself [emphasis added].   

Two points may be made. First, it appears that this observation, whether correct in principle or not, is not entirely consistent with cases involving a foreign proper law. In these cases, the Supreme Court has (despite NTPC v Singer) consistently rejected the suggestion that the designation of foreign proper law implies that foreign law governs the arbitration agreement or the conduct of arbitral proceedings as well. For example, as we discussed, the Court held in Citation Infowares that the designation of American law as the proper law of the contract does not warrant the inference that American law applies to the arbitration. 

Secondly, this case raised an issue the Court did not need to resolve in Doosan and Videocon – is the designation of a foreign seat of arbitration in and of itself sufficient to impliedly exclude Part I? The Court’s reasoning in Doosan suggests that it is (see paragraph 15), while the emphasis in Videocon on the designation of a foreign lex arbitri suggests that it is not. Indeed, the decision in Bhatia International itself may indicate that a foreign seat is not sufficient, because there the seat of arbitration was Paris, but an added complication is that there is a view that section 9 may have to be treated differently from other agreements. The Court’s answer in Yograj – that Rule 32 resulted in implied exclusion – strongly suggests that the A and C Act would have applied in the absence of Rule 32, even though Singapore was the seat of arbitration. In short, while this may be the result dictated by authority, the seat of arbitration in Indian law has perhaps a more marginal role than it deserves in determining whether Part I has been impliedly excluded.

Another analysis of the case is available here.

*Readers may wish to note that there are a few typographical errors in the judgment of the Supreme Court that may cause confusion: (i) it is stated in paragraph 3 that the parties had agreed that the law governing the arbitration was the A and C Act, 1996 – clause 27 actually provides that the law of India shall govern the agreement, not the arbitration; (ii) in paragraph 36, it is stated that the question in Bhatia International was whether the A and C Act applies when the seat of arbitration is in India – the question was in fact whether the Act applies when the seat is outside India. Readers may also wish to note that the Respondent in the SLP was Ssang, but that the Respondent before the single arbitrator was Yograj, and references to “Respondent” in the judgment should be read accordingly. 

Hybrid Companies and Restrictions on Transferability

We have previously discussed at length the law on the scope of s. 111A(2) of the Companies Act, 1956 [“CA 1956”]. In its recent judgment in Jer Rutton Kavasmanek v Gharda Chemicals, the Bombay High Court has considered this issue, as well as another controversial area in Indian company law – whether “public” and “private” are exhaustive of the types of companies contemplated by the CA 1956.

The case arose out of a long-drawn family dispute between the CMD of Gharda Chemicals Ltd. [“GCL”], Dr. Gharda, and his sister’s family (Mrs. Jer Rutton Kavasmanek). GCL had originally functioned as a partnership to which Mr Rutton Kavasmanek had contributed the bulk of the funds, but in which Dr Gharda held a 40 % share of the profits. Subsequently when the business was in dire straits Dr Gharda had received an injection of capital from the Rebello family, which, however, was eventually allotted less than its promised share in the business. When the partnership was incorporated as a private company, Dr Gharda held 60 % of the share capital, and art 57 of the Articles of Association provided that no member could sell his shares to an outsider if an existing member was willing to offer a fair price. On 17 August, 1988, the company became a deemed public company by virtue of the provisions of s. 43A. Subsequently, after the 2000 amendment to the definition of private company in s. 3(1)(iii)(d), the company proposed to alter its articles to bring them into conformity with the amendment, by providing that it could not accept deposits except as specified in that section. The Kavasmanek group voted against this resolution and it was defeated, after which GCL took the position that it had become a full-fledged public company, and that art 57 had ceased to be binding. Subsequently, there were multiple rounds of litigation between the parties (claims of oppression and mismanagement etc.) and the Kavasmanek group sought an injunction when it appeared that Dr Gharda intended to sell some of his shares to an outsider.

There were thus two important issues of law the single judge had to consider – first, whether s. 111A(2) applied to GCL on account of s. 43A/s. 3(1)(iii)(d) and secondly, if it did, whether art 57 had ceased to be binding. The first of these questions at first sight appears to be a non-issue, since the common assumption is that a company is either private or public. The uncertainty, however, arises from the language the legislature has chosen to use, especially post the 2000 amendment. In the CA 1956 as originally enacted, a public company was simply defined as a company which is “not a private company” – which is now sub-section (a) of s. 3(1)(iv). After the amendment, two additional conditions have been added – the share capital requirement, and s. 3(1)(iv)(c) – “a private company which is a subsidiary of a company which is not a private company”. One view is that a company incorporated as a private company which is then deemed to have become a public company (s. 43A for example, before its effective repeal) or becomes a subsidiary of a company which is a public company (for example on account of a change in shareholding pattern) does not for that reason cease to be a private company, because its “basic characteristics” remain the same. This view was accepted by the Company Law Board in Hillcrest Realty, a decision Mr Umakanth has discussed in more detail in this paper. In Jer Rutton Kavasmanek, this argument (without citing Hillcrest) was put to the single judge, so that there was no question of s. 111A(2) applying. His Lordship rejected it, holding that the legislature in 2000 had intended to entirely dispense with the concept of deemed public company that had been introduced by the 1974 amendment. Dharmadhikari J. observed that “[t]he effect of all this is that the concept of deemed public company under Section 43A and introduced by the Companies (Amendment) Act has now been abolished based on the recommendation of the working group the Companies Act, 1956.” The point was obiter, because the primary basis of Dharmadhikari J.’s conclusion was that the company had become a public company after the resolution in April 2001 to alter the articles was defeated. Nevertheless, the court’s general approach, and its reference to the Working Group, suggest that it is of the view that “public” and “private” are exhaustive.

One may have thought that the second question – s. 111A(2) – was concluded, so far as a single judge of the Bombay High Court is concerned, by the judgment of its Division Bench in Messer Holdings v SM Ruia. Yet, Dharmadhikari J. held that art 57 is void, because the shares of a public company are freely transferable, and that Messer Holdings is distinguishable because in that case the restriction appeared in a private agreement, while in this case it was part of the articles of association. While this distinction does exist, its force is perhaps somewhat undermined by the fact that the fulcrum of Messer was s. 111A(2), which, unlike s. 82, makes no reference to the source of the restriction. Readers may also wish to refer to the recent judgment of the Delhi High Court in Premier Hockey Development v IHF, where Sanghi J., following the judgment in Modi Rubber v Guardian International, has distinguished VB Rangaraj.

Several questions remain unanswered after these decisions – for example, whether s. 111A(2) distinguishes between different sources of a restriction, whether it is directed principally to the Board of Directors (as the Division Bench in Messer held) or to the subject matter of the sale (as Chandrachud J. in Bajaj Auto held), what the nature of a “restriction” is etc.

Fuerst Day Lawson: S. 50 Arbitration Act, and "consolidating legislation"

On Friday, a two-judge Bench of the Supreme Court (Alam and Lodha JJ.) gave judgment in Fuerst Day Lawson v Jindal Exports [hereinafter “FDL”]. The judgment contains a careful and comprehensive examination of a long line of authorities, and an authoritative analysis of two very important issues in arbitration law and civil procedure—whether a Letters Patent Appeal [“LPA”] is maintainable in circumstances in which an appeal does not lie under either s. 37 or s. 50 of the Arbitration and Conciliation Act, 1996 [“the 1996 Act”], and more generally, what it means to say (correctly) that the 1996 Act is a consolidating legislation. This post provides a detailed account of the reasons the Court gave (omitting a preliminary objection), with paragraph numbers to facilitate easy reference; a second post will discuss some of those reasons in more detail.

The case arose out of a batch of appeals from the Delhi and Calcutta High Courts in which an order of a single judge on an application to enforce a foreign award had been challenged before a Division Bench, under Letters Patent Rules. The Delhi High Court had held that such appeals are not maintainable; the Calcutta High Court had taken the contrary view. The Supreme Court’s conclusion that an LPA is not maintainable in these circumstances was based on its analysis of three broad sets of issues, of which the second and the third are the most important.

First, the Court examined cases in which it had been argued that an order passed by a single judge under various special legislation is immune from challenge under the Letters Patent Rules. These cases did not fall into any pattern. For example, the Supreme Court had held that an LPA is maintainable against a judgment given by a single judge under: (a) s. 76(1) of the Trademarks Act, 1940 (National Sewing Thread Co v James Chadwick—a three-judge Bench); (b) s. 6 of the Specific Relief Act, 1963 (Vinita Khanolkar v Pai—a two-judge Bench); (c) s. 54 of the Land Acquisition Act, 1894 (Sharda Devi v State of Bihar—a three-judge Bench); (d) s. 299 of the Indian Succession Act, 1925 (Subal Paul v Malina Paul—a three-judge Bench) and (e) order 21 of the Civil Procedure Code [“CPC”], for example in an application to set aside a sale (PS Sathappan v Andhra Bank—a Constitution Bench). Several reasons were given in these cases—that exclusion of jurisdiction cannot be readily inferred (Subal Paul); the general principle that an appeal, once it is before a court, must be regulated in accordance with the rules of practice of that court, including Letters Patent (James Chadwick) and that Letters Patent jurisdiction must be excluded expressly, because it was preserved by the Government of India Act and the Constitution of India (Sharda Devi; Vinita Khanolkar). On the other hand, the Court had held, for example, that an LPA is not maintainable against a judgment given by a single judge under s. 39(1) of the Arbitration Act, 1940 (Union of India v Mohindra Supply and other cases), principally because the provision indicated that the legislature intended to create a self-contained code of adjudication. In FDL, the Supreme Court demonstrated (¶29) that these cases do not really conflict, and noted that Subal and PS Sathappan expressly recognised that a self-contained code can have the effect of excluding any general rule of civil procedure, including LPA. In other words, the question had to be resolved by simply asking on which side of the line the legislature intended s. 50 of the Arbitration Act to fall, and not by resort to any general principle that LPA can, or cannot, be easily excluded.

Secondly, this led the Court to examine the relationship between three arbitration legislations—s. 39 of the Arbitration Act, 1940 [“the 1940 Act”], s. 6 of the Foreign Awards (Recognition and Enforcement) Act, 1961 [“the 1961 Act”] and ss. 37, 49 and 50 of the 1996 Act. S. 39 of the 1940 Act corresponds to s. 37 of the 1996 Act, which provides, in Part I of the Act, that an appeal “shall lie from the following orders (and from no others)”, and proceeds to list those orders. S. 50 of the 1996 Act provides, in Part II of the Act, that “an appeal shall lie from the order” refusing to refer the parties to arbitration under s. 45 or enforce a foreign award under s. 48. It does not contain the expression “and from no others”. Senior counsel for FDL therefore conceded that Mohindra Supply would apply pro tanto to an appeal against a judgment under s. 37, but argued that s. 50 is different because of the omission of the crucial expression “and from no others”. The Supreme Court held that even if ss. 37 and 50 are to be treated differently (¶51), it is not because of the expression “and from no others”. For one, it is possible that it was merely clarificatory, since it was used in “brackets” by the legislature (¶¶ 36, 37), and more importantly, a close analysis of the 1961 Act, the predecessor to s. 50, demonstrated that there was a powerful reason to construe s. 50 narrowly. Under s. 6(1) of the 1961 Act, a foreign award was enforced in India by a court pronouncing judgment “according to the award”. In other words, it was the decree of an Indian court embodying a foreign award that was enforced, and s. 6(2) provided that no appeal would lie from that decree except where the decree is “in excess of or not in accordance with the award”. The 1996 Act makes a fundamental change to this scheme, because s. 49 provides that a foreign award that a court is satisfied is enforceable “shall be deemed to be a decree of that Court.” The result, as the Supreme Court observes in FDL (¶58), is not only to eliminate the intervening procedural step of giving judgment embodying the foreign award, but also to “completely remove” the possibility of an appeal even on the limited ground that s. 6(2) previously provided. The inference from this is best expressed in the words of the Supreme Court (¶59): “[i]t would be futile, therefore, to contend that though the present Act even removes the limited basis on which the appeal was earlier maintainable, yet a Letters Patent Appeal would lie notwithstanding the limitations imposed by Section 50 of the Act.” An important question, of course, is whether an LPA was excluded under s. 6(1) of the 1961 Act, notwithstanding s. 6(2), and will be discussed in more detail subsequently.

The third reason the Supreme Court gave for its conclusion is of even wider significance—it held that an LPA must be taken to have been excluded by the legislature because the 1996 Act is a consolidating legislation. In support of this proposition, the Court referred to the Statement of Objects and Reasons and the Bill that preceded the Act, and in particular to the limited “supervisory” jurisdiction envisaged for the courts, in line with the goals of the UNCITRAL Model Law. In addition, the Court noticed that the 1940 Act, which was itself the successor legislation to the Arbitration Act, 1899, had raised similar questions, and that the courts had almost uniformly taken the view that there was no room to bring an ordinary civil suit to enforce an arbitration agreement “outside” the definition of that term in the 1940 Act (Meredith J., Gauri Singh v Ramlochan Singh and Chagla C.J., Natverlal Bhalakia)—this was a close analogy to the question whether an appeal under “ordinary civil law” is maintainable notwithstanding a specific appeal mechanism under the 1996 Act (¶60). Furthermore, the very question before the Supreme Court—whether an LPA is maintainable—had been answered in the negative in Mohindra Supply in the context of the 1940 Act. The conclusion the Supreme Court drew from this (¶72) was as follows:

72. It is, thus, to be seen that Arbitration Act 1940, from its inception and right through 2004 (in P.S. Sathappan) was held to be a self-contained code. Now, if Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it "a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done" (emphasis mine).

In summary, this important judgment of the Supreme Court clarifies that (a) s. 50 of the 1996 Act is even narrower than its predecessor, s. 6 of the 1961 Act; (b) more generally, that implied exclusion of ordinary civil jurisdiction depends on a close analysis of the structure of the special legislation as evidence of the likely intention of the legislature; and (b) that a consolidating legislation is more likely to have so intended than other special legislation. A subsequent post will discuss these reasons in more detail, and the implications for other areas of the Arbitration Act of the use the Court made of the fact that it is a consolidating legislation.

Guest Post: Supreme Court's View on Substantive and Curial Law in Arbitration

(In the following post, Mr Vijay Kumar, Advocate, Madras High Court and Associate, Iyer & Thomas, discusses the law on implied exclusion)

This post analyses few of the significant decisions of the Supreme Court (SC) with reference to the essential difference between the law governing the contract (substantive law) and the law governing the arbitration proceedings between the parties to the dispute (curial law).

S. 28 of the Arbitration and Conciliation Act, 1996 (A&C) provides for the rules applicable to the substance of the dispute. However, s. 28 is applicable only when the place of arbitration is in India as it starts with the words ‘[w]here the place of arbitration is situate in India…’. Therefore s. 28 does not apply where the place of arbitration is outside India.

In international commercial arbitrations, it has become a practice that parties agree upon a substantive law and on curial law. It is in these circumstances, question arises as to whether Part I of A&C is excluded either expressly or impliedly by choosing procedural law other than A&C for conducing arbitration proceedings.

With the scope being limited to the premises stated above, decisions of the SC in the matter of Bhatia International , Citation Infowares, Dozco v Doosan; Videocon v Union of India and Gujarat HC’s decision in Hardy Oil are analysed below.

The SC in Bhatia International’s case held that

“Part I of the A&C would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India, the provisions of Part I of A&C would compulsorily apply and the parties are free to deviate to the extent permitted by the derogable provisions of Part I. In cases of International Commercial arbitration 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.” (para 32)

The conclusion in unequivocal terms is that, that in international commercial arbitration where place of arbitration is outside India, the parties are free to agree upon the law governing the contract and the procedural law applicable to arbitral proceedings. Such law as agreed between the parties shall prevail over Part I of A&C. Therefore parties are free to choose the substantive law applicable to contract, curial law applicable to the arbitration proceedings and the judicial seat of arbitration. Where curial chosen is different from A&C, that law would prevail over A&C.

It has been succinctly expressed in the decision of Hardy Oil and Gas Limited’s case decided by the Gujarat High Court. To appreciate the views expressed by the Gujarat HC, the relevant clauses of the contract are extracted below-:

“Governing Law and Arbitration

1. This Agreement (except for the provisions of Clause 9.5.4 relating to arbitration) shall be governed by and construed in accordance with the substantive laws of India.

2. Any dispute or difference of whatever nature arising under, out of, or in connection with this Agreement, including any question regarding its existence, validity or termination, which the parties are unable to resolve between themselves within sixty (60) days of notification by one or more Parties to the other(s) that a dispute exists for the purpose of this Clause 9 shall at the instance of any Party be referred to and finally resolved by Arbitration under the rules of the London Court of International Arbitration (SLCIA), which Rules (Rules) are deemed to be incorporated by reference into this clause.

3. The Tribunal shall consist of two arbitrators who shall be Queen's Counsel, practicing at the English Bar in the Commercial Division of the High Court, ……………………….

4. The place of arbitration shall be London and the language of arbitration shall be English. The law governing arbitration will be the English law……..

The Gujarat HC relied on Bhatia International and has stated certain principles drawing on National Thermal Power Corporation vs Singer with reference to choice and applicability of substantive and curial law with specific reference to conflict of laws. The principles are given below in brief –

Ø Parties have 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 arbitration. Such choice is exercised either expressly or by implication.

Ø Where there is no express choice of law governing contract 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.

Ø 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.

Ø In the absence of any indication to the contrary, the governing 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 regard to procedural matters. 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. This would be the situation where there is absence of a specific agreement to the contrary, as is the situation in the matter on hand.

In this case parties had expressly chosen laws of England as the law governing the arbitration proceedings and hence it was held that provisions of Part I of A&C were expressly excluded and it would be the English law that would govern arbitration proceedings. Therefore parties could not invoke the Indian Courts under Part I of A&C.

A different view has been taken in Citation Infowares where the SC distinguished the case from the principles enumerated in NTPC’s case, and holds that provisions of Part I of A&C act are applicable to the subject dispute. The relevant arbitration clause between the parties is given below-

“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"

The SC held that the parties had agreed upon the substantive law and had not agreed either on the judicial seat of arbitration or the curial law. It also stated that there was nothing in the arbitration clause to exclude impliedly provisions of Part I of A&C and hence it was held that Part I of A&C is applicable and powers were exercised under Section 11 of the Act to appoint the arbitrator.

This view is contrary to principle enumerated in NTPC’s case wherein it was held that where there is no separate arbitration agreement but, arbitration agreement forms part of the principal agreement as a clause thereof and if there is no specific agreement between the parties to the contrary, law governing principal agreement would govern the arbitral proceedings. In Citation Infowares, though the parties had agreed upon the substantive law applicable to the contract, and the contract was silent on the curial law, it would have been the law of the contract that would be applicable to the arbitration proceedings. Since place of arbitration was not specified, SC held that the principle enunciated in the NTPC case would not be applicable. In my view, the omission by the parties to agree on place of arbitration makes Part I of A&C applicable is contrary to principles stated earlier. It introduces one more criterion to be considered in determining the intention of the parties which did not exist previously. When the parties had contemplated laws relating to California as the substantive law and there was nothing in the agreement to suggest that the parties negated the applicability of Californian laws as curial law. The natural inference would be that parties had positively agreed to subject themselves to laws of California as substantive and curial law.

In Dozco vs Doosan, SC held that by specifying the substantive law, and the seat of arbitration as Republic of Korea it becomes fairly clear that the parties had agreed to exclude Part I of A&C and hence petition under Part I is not maintainable.

The arbitration clause that was agreed by the parties is given below for ready reference -

Article 23.1

“This agreement shall be governed by and construed in accordance with the laws of The Republic of Korea.

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)”

The SC held that language of Article 23.1 clearly suggests that all the three laws i.e the substantive law, curial law and the law relating to conduct of arbitration are the laws of The Republic of Korea. Hence parties impliedly excluded the application of Part I of A&C.

SC in Dozco’s case though has not stated in as many words but has followed the principles laid down in NTPC case. As in Bhatia International, the parties in Dozco had agreed upon ICC Rules of Arbitration. Since the substantive law applicable to the contract was the law relating to the Republic of Korea and the place of arbitration was Seoul which added up to enable SC reach conclusion that Part I of A&C was excluded by the parties and hence petition under Section 11 before SC was not maintainable. However as stated earlier, parties had agreed on ICC Rules and not on procedural law of Republic of Korea.

Lastly, traversing the decision in Videocon Industries Ltd vs Union of India, SC upheld the decision of Gujarat HC and the principles enunciated in Bhatia International and NTPC’s case. The clause of arbitration read as follows-

33.1 Indian Law to Govern

Subject to the provisions of Article 34.12, this Contract shall be governed and interpreted in accordance with the laws of India.

33.2 Laws of India Not to be Contravened

Subject to Article 17.1 nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India.

34.12. Venue and Law of Arbitration Agreement

The venue of sole expert, conciliation or arbitration proceedings pursuant to this Article, unless the Parties otherwise agree, shall be Kuala Lumpur, Malaysia, and shall be conducted in the English language. Insofar as practicable, the Parties shall continue to implement the terms of this Contract notwithstanding the initiation of arbitral proceedings and any pending claim or dispute. Notwithstanding the provisions of Article 33.1, the arbitration agreement contained in this Article 34 shall be governed by the laws of England.

The above clauses make it amply clear that substantive law is Indian Law and the curial law applicable is English law. Therefore the forum to be approached is English Courts and all the arbitration proceedings including interim measures, setting aside of award shall be in accordance with the provisions of English law.

To conclude, the decision of Bhatia International and NTPC is followed in all the cases. There is a distinction made in the case of Citation Infowares where even though the parties had agreed on the substantive law, and had omitted to agree on the place of arbitration and curial law, the SC differed from NTPC’s principle and held that omission by the parties to agree upon judicial seat of arbitration and language of arbitration resulted in applicability of Part I of A&C. When the parties had agreed upon the substantive law, the SC ought not to have looked at other considerations to determine applicability of Part I of A&C and the law governing the contract would be curial law as there is no contrary intention demonstrated by the parties to negate the applicability of substantive law as curial law. The decision is also not practically in accordance with the intention of the parties as SC appointed an Indian National to adjudicate the dispute in accordance with the laws of State of California.

It is necessary to state here that SC in Dozco’s case relies on the principle stated by Mustill and Boyd “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 my view, this presumption would arise only when the parties had agreed on the judicial seat of arbitration. When the parties had agreed on the substantive law and omitted to agree on the curial law and on the seat of arbitration, it did not give cause for holding that Part I becomes applicable to the parties. Part I of A&C cannot be applied to give benefit of doubt to the parties. When substantive law has been agreed with open eyes, unless contrary is shown it is presumed that parties would not agree to contrary with respect to curial law (NTPC case).