Hon'ble Judges/Coram:
Madan B. Lokur, R.K. Agrawal and D.Y. Chandrachud

JUDGMENT

Madan B. Lokur, J.

2. Since the facts of the case have been detailed by both the learned judges in their separate judgments, it is not necessary for us to detail them for the third time. What is necessary to state, however, is that the parties had entered into a contract and some disputes and differences arose between them. The contract contained an arbitration Clause and Centrotrade invoked it. Pursuant thereto the Indian Council of Arbitration appointed an arbitrator. The arbitrator gave a NIL award and then Centrotrade invoked the second part of the arbitration Clause and the arbitrator in London gave an award on 29^th September, 2001 in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The award rendered by the arbitrator in London was sought to be enforced by Centrotrade by moving an application Under Section 48 of the Arbitration and Conciliation Act, 1996.

3. The arbitration Clause in the contract between the parties is Clause 14 and this reads as follows:

14. Arbitration-All disputes or differences whatsoever arising between the parties out of, or relating to, the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in India through the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration.

If either party is in disagreement with the arbitration result in India, either party will have the right to appeal to a second arbitration in London, UK in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in effect on the date hereof and the result of this second arbitration will be binding on both the parties. Judgment upon the award may be entered in any court in jurisdiction.

4. Clause 16 of the contract is also important and this reads as follows:

16. Construction-The contract is to be constructed and to take effect as a contract made in accordance with the laws of India.

Appreciating Clause 14 of the contract

6. At the outset, it is necessary to appreciate the parties' intention when they agreed upon the arbitration Clause in the contract. A plain reading of the arbitration Clause suggests that the contracting parties intended: (a) Firstly, a settlement of their disputes or differences by arbitration in India through an arbitration panel of the Indian Council of Arbitration and in accordance with the Rules of Arbitration of the Indian Council of Arbitration, and (b) Secondly, if either of the contracting parties was in disagreement with the 'arbitration result' in India, then the aggrieved party would have a right to appeal to a second arbitration in London in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The result of the appellate arbitration would be binding on both the parties, subject to a legal challenge in accordance with law. The text of the arbitration Clause is quite clear and explicit and does not admit of any doubt on its interpretation. The contracting parties intended Clause 14 of the contract to provide for two opportunities at resolving their disputes or differences. The first occasion would be a settlement by arbitration in India (the 'arbitration result') and the second occasion would be by arbitration in London, with the second occasion being in the nature of an appeal against the 'arbitration result' in India.

7. It was the contention of learned Counsel for Centrotrade that the 'arbitration result' in India was not an award as conventionally understood with reference to arbitration, but merely a 'result' of arbitration given by an arbitration panel of the Indian Council of Arbitration and nothing more. We are not at all inclined to accept this interpretation. While Clause 14 of the contract may have used the expression 'arbitration result' and not the expression 'arbitration award' clearly the parties' intention was that the 'arbitration result' would be an award or at least in the nature of an award rendered by the arbitration panel of the Indian Council of Arbitration. The proceedings before the arbitration panel were intended to be structured and held in accordance with the Rules of Arbitration of the Indian Council of Arbitration. The result of such proceedings would inevitably be an arbitration award, regardless of the nomenclature used by the parties. It is difficult to interpret the words 'arbitration result' other than meaning an arbitration award.

8. We say this also because if the submission of learned Counsel for Centrotrade were to be accepted, it would mean that if both the contracting parties were satisfied with the 'arbitration result' (or negatively put, if neither party was dissatisfied with the 'arbitration result') there would be no method of enforcing that 'arbitration result' should such enforcement become necessary. This would create a vacuum post the 'arbitration result'. It is to avoid such a vacuum that 'arbitration result' must be understood to mean an award of the arbitration panel of the Indian Council of Arbitration and an award that could be enforced in accordance with the laws of India, that is, the Arbitration and Conciliation Act, 1996 (for short 'the A&C Act').

9. The general principle that we have accepted is supported by two passages in Comparative International Commercial Arbitration.¹ In paragraph 24-3 thereof reference is made to Article 31(1) of the United Nations Commission on International Trade Law (or UNCITRAL) Rules to suggest that while all awards are decisions of the arbitral tribunal, all decisions of the arbitral tribunal are not awards. Similarly, while a decision is generic, an award is a more specific decision that affects the rights of the parties, has important consequences and can be enforced. The distinction between an award and a decision of an arbitral tribunal is summarized in Paragraph 24-13. It is observed that an award:

(i) concludes the dispute as to the specific issue determined in the award so that it has res judicata effect between the parties; if it is a final award, it terminates the tribunal's jurisdiction;

(ii) disposes of parties' respective claims;

(iii) may be confirmed by recognition and enforcement;

(iv) may be challenged in the courts of the place of arbitration.

10. In International Arbitration² a similar distinction is drawn between an award and decisions such as procedural orders and directions. It is observed that an award has finality attached to a decision on a substantive issue. Paragraph 9.08 in this context reads as follows:

9.08 The term 'award' should generally be reserved for decisions that finally determine the substantive issues with which they deal. This involves distinguishing between awards, which are concerned with substantive issues, and procedural orders and directions, which are concerned with the conduct of the arbitration. Procedural orders and directions help to move the arbitration forward; they deal with such matters as the exchange of written evidence, the production of documents, and the arrangements for the conduct of the hearing. They do not have the status of awards and they may perhaps be called into question after the final award has been made (for example as evidence of 'bias', or 'lack of due process').

11. In International Commercial Arbitration³ the general characteristics of an award are stated. In Paragraph 1353 it is stated as follows:

1353.-An arbitral award can be defined as a final decision by the arbitrators on all or part of the dispute submitted to them, whether it concerns the merits of the dispute, jurisdiction, or a procedural issue leading them to end the proceedings.

This is subsequently elucidated through four aspects of an award, namely: (i) An award is made by the arbitrators; (ii) An award resolves a dispute; (iii) An award is a binding decision; and (iv) An award may be partial.

12. The arbitration result in the present case has all the elements and ingredients of an arbitration award. Taking also into consideration the view expressed by the above authors, we have no hesitation in concluding that the 'arbitration result' in the first part of Clause 14 of the contract must mean an arbitration award given by the arbitral panel of the Indian Council of Arbitration. To this extent we disagree with learned Counsel for Centrotrade but agree with learned Counsel for Hindustan Copper Limited (hereafter referred to as 'HCL').

13. The alternative submission of learned Counsel for Centrotrade is that in any event on being dissatisfied with the arbitration result, the second part of Clause 14 of the agreement entitles the aggrieved party to appeal to a second arbitration in London in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. However, according to learned Counsel for HCL the second part of Clause 14 of the contract is contrary to the laws of India.

14. In our opinion the plain language of Clause 14 specifically provides for a second arbitration, in the form of an 'appeal' against the award of the arbitration panel of the Indian Council of Arbitration. We do not think it necessary to labour on this issue, given the express words used in Clause 14. For the record, we may note that learned Counsel for HCL spent considerable time on explaining that the right to file an appeal can only be created by a statute and not by an agreement between the parties. This may be so in respect of litigation initiated in courts under a statute or for the enforcement of common law rights, but that does not prevent parties from entering into an agreement providing for non-statutory appeals so that their disputes and differences could preferably be settled without resort to court processes.

15. However, what does require serious consideration is the submission of learned Counsel for HCL that the provision for an appellate arbitration in Clause 14 is prohibited by the laws of India on three counts: the provisions of the A&C Act do not sanction an appellate arbitration; there is an implied prohibition to an appellate arbitration in the A&C Act; and an appellate arbitration is even otherwise contrary to public policy.

Appellate arbitration and the A&C Act

16. Before actually discussing the validity of an appellate arbitration in the context of the A&C Act, it might be mentioned that it is doubtful if HCL can even contend that an appellate arbitration is contrary to the laws of India. If this contention is accepted, then it could be argued that HCL entered into a contract with Centrotrade fully conscious and aware that one of the provisions of the contract was contrary to the laws of India. This could amount to HCL playing a fraud on Centrotrade and could have serious long-term implications and ramifications for international commercial contracts with an Indian party.

17. But be that as it may, it might be fruitful as a starting point to consider the view expressed in the Report of the Working Group on International Contract Practices on the Work of its Third Session.⁴ Incidentally, India was one of the State members of that UNCITRAL Working Group. With reference to an appeal [before another arbitral tribunal (of second instance)] against an arbitral award, Question 6-1 was posed and answered as follows:

Question 6-1: Should the model law recognize any agreement by the parties that the arbitration award may be appealed before another arbitral tribunal (of second instance)?

106. There was wide support for the view that parties were free to agree that the award may be appealed before another arbitral tribunal (of second instance), and that the model law should not exclude such practice although it was not used in all countries. However, the Working Group was agreed that there was no need to include in the model law a provision recognizing such practice. It was noted, however, that this conclusion might have to be reconsidered in the light of the ultimate contents of the model law, and in particular its chapter on means of recourse against an award.

[Emphasis supplied by us].

This view also throws open the issue of party autonomy, which we will advert to a little later. But for the present, we may also refer to the Handbook of Arbitration Practice⁵ in which a reference is made to a two-tier system of arbitration particularly in commodity trade in the following words:

.....Fundamental and ancient feature of commodity trade arbitration is the two tier system whereby the first arbitration is held speedily and relatively informally and results in the issuance of an award, which, subject to time limits, can be appealed by a dissatisfied party to a board of appeal of the relevant association. This gives a party two bites at the cherry and the arbitral process is not deemed to be concluded until the board of appeal has issued its final award.......In two tier systems, the awards of the tribunal, sole arbitrator or umpire are usually called awards of arbitration, to distinguish them from appeal awards issued by boards of appeal.

18. Our attention has also been drawn to several jurisdictions in which the statutory acceptance of a two-tier system of arbitration is prevalent, but it is not necessary to discuss this since the contention of learned Counsel for HCL is that the law in India through the A&C Act is quite different.

19. Learned Counsel for the parties agree that historically in India prior to the enactment of the A&C Act, two-tier arbitration was permissible. Justice Sinha adverted to the existence of a two-tier arbitration system in India prior to the A&C Act and referred to several decisions in this regard but did not pronounce on its validity or otherwise.⁶ However, Justice Chatterjee was of the opinion that prior to the A&C Act a two-tier arbitration system was valid and permissible in India.⁷

20. The significance of this is that Parliament must be assumed to have known the view of the UNCITRAL Working Group (of which India was a State member) and must be assumed to have known the decisions of various domestic courts and yet chose not to specifically prohibit the two-tier arbitration system. If that be so, we are entitled to proceed on the basis that even after the passage of the A&C Act, there can perhaps be no objection to the existence of a two-tier arbitration system. But we do not propose to base our decision on this assumption. We may, however, note that it has been brought to our notice that there are several decisions rendered by the Bombay High Court⁸ that have accepted the two-tier arbitration system. There are several decisions of the Delhi High Court that have taken the view that since the A&C Act does not proscribe a two-tier arbitration procedure, such a system is acceptable.⁹

21. Learned Counsel for HCL relied upon the following passage from Fuerst Day Lawson Limited v. Jindal Exports Ltd.   MANU/SC/0761/2011 : (2011) 8 SCC 333 to contend that since the A&C Act did not permit two-tier arbitrations such an arbitration system was not permissible:

22. On the other hand, in ITI Ltd. v. Siemens Public Communications Network Ltd.   MANU/SC/0502/2002 : (2002) 5 SCC 510 the question before this Court was whether the provisions of the Code of Civil Procedure were applicable to the A&C Act or not. In response, this Court observed¹⁰ that since there was no express provision excluding the provisions of the Code in the A&C Act, it cannot be held by inference that the provisions of the Code were inapplicable.

23. In any event, we are afraid the passage referred to by the learned Counsel from Fuerst Day Lawson has been misunderstood and is even otherwise inapposite since we are not concerned with a statutory appeal but a non-statutory process agreed upon by parties that has nothing to do with court procedures. We are also unable to fully subscribe to the broad observation that acts mentioned in a statute are permissible but acts not mentioned therein are impermissible. It could very well be the converse. In any event, the observations of this Court were in the context of a statutory appeal not provided (or provided). In that context, it was observed that if an appeal is not provided for by a statute, then the filing of an appeal is not permissible. This was made clear many years ago by the Constitution Bench in Garikapati Veeraya v. N. Subbiah Choudhry   MANU/SC/0008/1957 : 1957 SCR 488 when it was concluded that:

[Emphasis supplied by us].

We are not concerned with an appeal not provided for by the A&C Act, but an appeal procedure mutually agreed upon by the parties to the contract. This is an area of party autonomy, which we will consider a little later, but for the present the next issue is whether the A&C Act prohibits a two-tier arbitration system by necessary implication.

24. Reference was first made by learned Counsel for HCL to the provisions of Sub-section (1) of Section 34 and then to Sections 35 and 36 of the A&C Act. These read as follows:

34. Application for setting aside arbitral award.--(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).

35. Finality of arbitral awards.--Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.

36. Enforcement. (1) Where the time for making an application to set aside the arbitral award Under Section 34 has expired, then, subject to the provisions of Sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court.

(2) Where an application to set aside the arbitral award has been filed in the Court Under Section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of Sub-section (3), on a separate application made for that purpose.

(3) Upon filing of an application under Sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that xxx xxx xxx

25. We are unable to appreciate how these provisions come to the aid of learned Counsel for HCL. Sub-section (1) of Section 34 of the A&C Act entitles a party to an arbitration to approach a court "only by an application" for setting aside an award. This is sought to be read by learned Counsel in a different way to suggest that an award can be set aside only by a court, thereby excluding a two-tier arbitration procedure. If the contention of learned Counsel were to be accepted, we would perforce have to read the Sub-section quite differently by repositioning the word "only" and the Sub-section to read: "Recourse only to a Court against an arbitral award may be made by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3)." Or "Recourse against an arbitral award may be made only to a Court by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3)." We are afraid we cannot read or redraft the statute in the manner suggested by learned Counsel.

26. Learned Counsel would like us to read Sub-section (1) of Section 34 of the A&C Act in conjunction with Section 35 thereof and thereby conclude that an arbitral award would be final and binding unless it is challenged and set aside by a court and that the setting aside can be only by a court and none else. The acceptance of this submission would be possible only if we were to first accept the interpretation given by learned Counsel to Sub-section (1) of Section 34 of the A&C Act. However, since we do not agree with learned Counsel on the interpretation of Sub-section (1) of Section 34 of the A&C Act, acceptance of the contention of learned Counsel does not arise.

27. In our opinion, on a combined reading of Sub-section (1) of Section 34 of the A&C Act and Section 35 thereof, an arbitral award would be final and binding on the parties unless it is set aside by a competent court on an application made by a party to the arbitral award. This does not exclude the autonomy of the parties to an arbitral award to mutually agree to a procedure whereby the arbitral award might be reconsidered by another arbitrator or panel of arbitrators by way of an appeal and the result of that appeal is accepted by the parties to be final and binding subject to a challenge provided for by the A&C Act. This is precisely what the parties have in fact agreed upon and we see no difficulty in honouring their mutual decision and accepting the validity of their agreement.

28. The fact that recourse to a court is available to a party for challenging an award does not ipso facto prohibit the parties from mutually agreeing to a second look at an award with the intention of an early settlement of disputes and differences. The intention of Section 34 of the A&C Act and of the international arbitration community is to avoid subjecting a party to an arbitration agreement to challenges to an award in multiple forums, say by way of proceedings in a civil court as well under the arbitration statute. The intention is not to throttle the autonomy of the parties or preclude them from adopting any other acceptable method of redressal such as an appellate arbitration. In this context, the view expressed in the Analytical Commentary On Draft Text of A Model Law on International Commercial Arbitration-Report of the Secretary-General¹¹ is quite relevant. This commentary deals, inter alia, with Article 34(1) of the Model Law on International Commercial Arbitration¹² and it is stated as follows:

1. Existing national laws provide a variety of actions or remedies available to a party for attacking the award. Often equating arbitral awards with local court decisions, they set varied and sometimes extremely long periods of time and set forth varied and sometimes long lists of grounds on which the award may be attacked. Article 34 is designed to ameliorate this situation by providing only one means of recourse available during a fairly short period of time and for a rather limited number of reasons.

2. The application for setting aside constitutes the exclusive recourse to a court against the award in the sense that it is the only means for actively attacking the award, i.e. initiating proceedings for judicial review........ Finally, article 34(l) would not exclude recourse to a second arbitral tribunal, where such appeal within the arbitration system is envisaged (as, e.g., in certain commodity trades).¹³

[Emphasis supplied by us].

29. Similarly, the Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006¹⁴ also affirms this position in the following words:

44. The disparity found in national laws as regards the types of recourse against an arbitral award available to the parties presents a major difficulty in harmonising international arbitration legislation. Some outdated laws on arbitration, by establishing parallel regimes for recourse against arbitral awards or against court decisions, provide various types of recourse, various (and often long) time-periods for exercising the recourse, and extensive lists of grounds on which recourse may be based. That situation (of considerable concern to those involved in international commercial arbitration) is greatly improved by the Model Law, which provides uniform grounds upon which (and clear time periods within which) recourse against an arbitral award may be made.

a. Application for setting aside as exclusive recourse

45. The first measure of improvement is to allow only one type of recourse, to the exclusion of any other recourse regulated in any procedural law of the State in question. Article 34(1) provides that the sole recourse against an arbitral award is by application for setting aside, which must be made within three months of receipt of the award (Article 34(3)). In regulating "recourse" (i.e., the means through which a party may actively "attack" the award), Article 34 does not preclude a party from seeking court control by way of defence in enforcement proceedings (Articles 35 and 36). Article 34 is limited to action before a court (i.e., an organ of the judicial system of a State). However, a party is not precluded from appealing to an arbitral tribunal of second instance if the parties have agreed on such a possibility (as is common in certain commodity trades).

[Emphasis supplied by us].

30. Learned Counsel for HCL contended that since an award of the first instance is final and binding on the parties Under Section 35 of the A&C Act there cannot be an 'appeal' provision in the agreement between the contracting parties. The "final and binding" nature of an arbitral award (postulated by Section 35 of the A&C Act) has come up for consideration in this Court. This Court has taken the view that an award is not a waste paper only because it has not been enforced. The existence of an award has some legal consequences as well. In Satish Kumar and Ors. v. Surinder Kumar   MANU/SC/0264/1968 : [1969] 2 SCR 244 paragraph 7 of the Schedule I of the Arbitration Act, 1940¹⁵ was considered. This is almost in pari materia with Section 35 of the A&C Act. The question before this Court was: Whether an award given under the Arbitration Act, 1940 on a private reference requires registration Under Section 17(1)(b) of the Indian Registration Act, if the award effects partition of immovable property exceeding the value of Rs. 100/-?

31. In that case, this Court relied upon the following passage from Uttam Singh Dugal & Co. v. The Union of India¹⁶ which held that once an award is made on a subject-matter, no action can be started on the original claim which had been the subject matter of reference. This Court was not concerned with any agreement between parties to subject the correctness of the award to further scrutiny through an 'appeal' procedure. It was held:

The true legal position in regard to the effect of an award is not in dispute. It is well settled that as a general rule, all claims which are the subject-matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after an award has been pronounced, the rights and liabilities of the parties in respect of the said claims can be determined only on the basis of the said award. After an award is pronounced, no action can be started on the original claim which had been the subject-matter of the reference. As has been observed by Mookerjee, J. in the case of Bhajahari Saha Banikya v. Behary Lal Basak 33 Cal. 881 "the award is, in fact, a final adjudication of a Court of the parties' own choice, and until impeached upon sufficient grounds in an appropriate proceeding, an award, which is on the fact of it regular, is conclusive upon the merits of the controversy submitted, unless possibly the parties have intended that the award shall not be final and conclusive... in reality, an award possesses all the elements of vitality, even though it has not been formally enforced, and it may be relied upon in a litigation between the parties relating to the same subject-matter." This conclusion, according to the learned Judge, is based upon the elementary principle that, as between the parties and their privies, an award is entitled to that respect which is due to the judgment of a court of last resort. Therefore, if the award which has been pronounced between the parties has, in fact, or can, in law, be deemed to have dealt with the present dispute, the second reference would be incompetent. This position also has not been and cannot be seriously disputed.

[Emphasis supplied by us].

32. This Court held that the above decision stated the correct position in law and was binding. This Court further adverted to paragraph 7 of Schedule I to the Arbitration Act, 1940 to state:

....We may mention that no comment was made in these cases on the provisions of para 7 of Schedule 1 to the Act. This para provides:

7. The award shall be final and binding on the parties and persons claiming under them respectively.

If the award is final and binding on the parties it can hardly be said that it is a waste paper unless it is made a Rule of the Court.

33. In a separate opinion Justice Hedge held as follows:

......Arbitration proceedings, broadly speaking may be divided into two stages. The first stage commences with arbitration agreement and ends with the making of the award. And the second stage relates to the enforcement of the award. Paragraph 7 of the First Schedule to the Arbitration Act lays down that "the award shall be final and binding on the parties and persons claiming under them respectively". Therefore it is not possible to agree with the Full Bench decisions of the Patna High Court and that of the Punjab and Haryana High Court that an award which is not made a decree of the Court has no existence in law. The learned Judges who decided those cases appear to have proceeded on the basis that an award which cannot be enforced is not a valid award and the same does not create any rights in the property which is the subject matter of the award. This in my opinion is not a correct approach. The award does create rights in that property but those rights cannot be enforced until the award is made a decree of the Court. It is one thing to say that a right is not created, it is an entirely different thing to say that the right created cannot be enforced without further steps.

[Emphasis supplied by us].

34. It is therefore quite clear that the "final and binding" Clause in Section 35 of the A&C Act does not mean final for all intents and purposes. The finality is subject to any recourse that an aggrieved party might have under a statute or an agreement providing for arbitration in the second instance. The award is binding in a limited context.

35. Unless this interpretation is accepted, a second instance arbitration would be per se invalid in India. This would be going against the grain of a long line of decisions rendered by various courts in the country which have accepted the validity of a two-tier arbitration procedure under institutional Rules and have not taken the view that a two-tier arbitration procedure is per se invalid. Reference in this regard may be made to a somewhat recent decision rendered in Shri Lal Mahal Ltd. v. Progetto Grano Spa   MANU/SC/0655/2013 : (2014) 2 SCC 433 wherein an award by the Board of Appeal of the Grain and Feed Trade Association, London was considered and upheld. Similarly in Subhash Aggarwal Agencies v. Bhilwara Synthetics Ltd.¹⁷ the decision of an appellate Tribunal constituted under the Delhi Hindustan Mercantile Association Rules and Regulations was under consideration. Several other instances could be cited but that is not necessary. There are several decisions of several High Courts to the same effect and we see no error in the implicit acceptance of the general principle of two-tier arbitrations.

Party autonomy

[Emphasis supplied by us].

Later in paragraph 10 of the Report, it was held:

In the matter of interpretation, the court has to make different approaches depending upon the instrument falling for interpretation. Legislative drafting is made by experts and is subjected to scrutiny at different stages before it takes final shape of an Act, Rule or Regulation. There is another category of drafting by lawmen or document writers who are professionally qualified and experienced in the field like drafting deeds, treaties, settlements in court, etc. And then there is the third category of documents made by laymen who have no knowledge of law or expertise in the field. The legal quality or perfection of the document is comparatively low in the third category, high in second and higher in first. No doubt, in the process of interpretation in the first category, the courts do make an attempt to gather the purpose of the legislation, its context and text. In the second category also, the text as well as the purpose is certainly important, and in the third category of documents like wills, it is simply intention alone of the executor that is relevant. In the case before us, being a contract executed between the two parties, the court cannot adopt an approach for interpreting a statute. The terms of the contract will have to be understood in the way the parties wanted and intended them to be. In that context, particularly in agreements of arbitration, where party autonomy is the ground norm, how the parties worked out the agreement, is one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions and the use of the expressions at the proper places in the agreement.

[Emphasis supplied by us].

[Emphasis supplied by us].

[Emphasis supplied by us].

Public policy and two-tier arbitrations

41. The question that now arises is the interplay between public policy and party autonomy and therefore whether embracing the two-tier arbitration system is contrary to public policy.

42. Years ago, it was said per Burroughs, J in Amicable Society v. Bolland (Fauntleroy's Case): "Public policy is a restive horse and when you get astride of it, there is no knowing where it will carry you."²² Perhaps to assist in getting over this uncertainty, Mustill and Boyd²³ identify four classes of provision regarded by the courts as contrary to public policy. They are: (i) Terms which affect the substantive content of the award; (ii) Terms which purport to exclude or restrict the supervisory jurisdiction of the Court; (iii) Terms which require the arbitrator to conduct the reference in an unacceptable manner; and (iv) Terms which purport to empower the arbitrator to carry put procedures or exercise powers which lie exclusively within the jurisdiction of the courts. Clause 14 of the agreement between the parties does not fall under any of these situations.

43. In our country, the case law on the subject has recently been exhaustively discussed and stated in Associate Builders v. Delhi Development Authority   MANU/SC/1076/2014 : (2015) 3 SCC 49 and it is not necessary to revisit this. Briefly, it has been held that an award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality, or

(d) if it is patently illegal.

45. We decline to read the A&C Act in the manner suggested by learned Counsel for HCL and hold that the arbitration Clause in the agreement between the parties does not violate the fundamental or public policy of India by the parties agreeing to a second instance arbitration. It follows from our discussion that the award which is required to be challenged by HCL is the award rendered on 29^th September, 2001 by the arbitrator in London.

Conclusion

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