National Thermal Power Corporation VS. Singer Co.

Facts of the case: The National Thermal Power Corporation of India (NTPC) entered into a
contract with The Singer Company (Singer), a British concern, to supply equipment and erect
certain projects in India. Singer co. filed a claim with the engineer of NTPC for damages of
caused by various acts and omissions and breach of the terms of the agreements by NTPC. The
general terms of the agreement states that the laws applicable to this contract shall be the laws in
force in India. The courts of Delhi shall have exclusive jurisdiction in all matters arising artier
this contract. The terms of the contracts include also a clause for submission of disputes for
arbitration wherein the place of arbitration was left to the choice of the arbitrators. The parties
had contractually chosen rules of the International Chambers of commerce (ICC) for conduct of
arbitration. In compliance with their agreed terms the parties submitted themselves for arbitration
conducted by ICC in London, having been chosen by the ICC arbitrators as the venue. The award
was made in London as an interim award in respect of contracts entered into between NTPC and
Singer Company. The contract was governed by Indian Law, entered into in India for its
performance solely in India. The only meaningful foreign element present in the facts is the
venue of arbitration. NTPC had filed an application under the provisions of the Arbitration Act.,
1940 before the Delhi High Court to set aside the interim award made in London by a tribunal
constituted by ICC. As against this ruling NTPC appealed to the Supreme Court.

Issue: whether the award in question was governed by the provisions of the Arbitration Act, and
as such became relevant for the courts in India only for the purposes of recognition and
enforcement as the statute indicated.

Held: The court discussed the whole concept of proper law of contract. This court also
considered at length the proper law of arbitration. The Supreme Court, examined the law of
arbitration in two aspects namely, (i) the law governing the arbitration agreement i.e. its proper
law and (ii) the court has clearly distinguished the law of arbitration in term of substantive and
procedural aspects. For the purpose of the present case such an approach was essential since the
parties had never expressed their intention to choose London as the arbitral tribunal: but at the
time they had stipulated that the arbitration would be conducted in accordance with ICC rules
and accordingly London was chosen by the arbitral tribunal constituted by the International
Court of Arbitration of ICC as the place of arbitration.

The court pointed out that the parties were free under ICC rules to determine the law which the
arbitrator shall apply to the merits of the dispute and in the absence of any stipulation by the
parties to the applicable law; the arbitrators may apply the law designated as the proper law by
the rules of conflict. However, the court expressed the view, which these self-contained and self-
regulating ICC rules are subject to the overriding powers of the appropriate national courts.
In the context of the two propositions pertaining to arbitration, stated earlier, the court observed
that the proper law of arbitration agreement is normally the same as the proper law of the
contract.

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… the arbitration
proceedings are conducted, in the absence of any agreement to the contrary in accordance with
the law of country in which the arbitration is held.

In the opinion of the court an award is foreign not merely because it is made in the territory of a
foreign state, but because it is made in such territory on an arbitration agreement not governed by
the law of India. Accordingly, it said that an award made in pursuance of an arbitration
agreement governed by the law of India though rendered outside India, was not treated in India
as a foreign award.

In the final analysis, the Supreme Court agreed with the tribunals ruling that the substantive law
of the contract is Indian law and the laws of England governed procedural matters in the
arbitration. On the facts of the case the apex court ruled that the award in question is an Indian
award or a domestic award under the Indian Arbitration Act, although the dispute as with a
foreigner and the arbitration itself was conducted and the award was made in a foreign state.

The other relevant factors that the court took into consideration were parties had expressly
chosen the Indian law as the applicable law to the contract, courts of Delhi to have exclusive
jurisdiction “in all matters arising under this contract”, agreement was executed in Delhi. the
contract to be performed in India, the form of agreement closely related to the system of law in
India, various Indian enactments were specifically mentioned in the agreement as applicable and
the arbitration agreement was contained in one of the clauses of the contract and not in a separate
agreement. The governing rule of the contract being Indian law, arbitration agreement also
would necessarily be governed by Indian law excepting the procedural aspects of the arbitration
which, due to the fact of being conducted in a foreign country would be governed by the law of
that country i.e. the law of England in the instant case.

In the result, the Supreme Court set aside the impugned judgement of the Delhi High Court and
allowed the present appeal.