The parameters that need to be considered for enforcement of foreign award have been enunciated by the Supreme Court in a recent decision in Shri Lal Mahal Ltd. v. Progetto Grano Spa,(2014) 2 SCC 433, wherein it was held as under:
"29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression public policy of India occurring in Section 34(2)(b)(ii) in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b)."
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 1.4.2014
CORAM:
The Honourable Mr.Justice R.SUDHAKAR
O.P.No.627 of 2007
APL Co. Pte. Ltd.,
vs.
Varadariya Exporters
Citation; MANU/TN/0368/2014
PRAYER: For enforcement of the final award under Section 47(1) read with Section 49 of the Arbitration and Conciliation Act, 1996 read with Article 1 of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, as per the terms of the said final award bearing AAA Case#:50T 181 00542 03, dated 13.8.2004 passed by the Arbitrator, Mr.Rajiv S.Khanna, American Arbitration Association, International Arbitration Tribunal and for execution of the same as a decree.
This Original Petition is filed under Section 47(1) read with Section 49 of the Arbitration and Conciliation Act, 1996 (for brevity, "the Act") to enforce the arbitration award dated 13.8.2014 passed in AAA Case#:50T 181 00542 03 by the American Arbitration Association, International Arbitration Tribunal and to execute the same as a decree.
2.1. The brief facts of the case are as follows: The petitioner entered into a Service Contract bearing No.LA01/0104, dated 29.10.2001 with the respondent in Chennai and the contract period was from 6.11.2001 to 30.6.2002. As per the contract, the respondent was to provide to the petitioner Minimum Volume Commitment of 100 Forty Equivalent Units (for brevity, "FEUs") during the contract period.
2.2. According to the petitioner, the respondent tendered only 26.5 FEUs as against 100 FEUs and in view of the failure on the part of the respondent to keep up the commitment, a notice was issued by the petitioner on 11.2.2003 calling upon the respondent to pay the dead freight amount to US$ 25,725/- at the rate of US$ 350/- per FEU.
2.3. In response to the said notice, the respondent sent a letter dated 15.2.2003 expressing their inability to keep up the commitment due to closure of business of their buyer in the foreign country and requested the petitioner to waive the payment of the dead freight.
2.4. After a series of correspondence, the parties sought to refer the dispute to an Arbitrator. As there was no consensus regarding the appointment of an Arbitrator, the petitioner invoked the arbitration clause in terms of Article 4(a) of the Service Contract and referred the dispute for arbitration under the Rules of the American Arbitration Association. The Arbitrator conducted a preliminary hearing on 29.3.2004. Despite service of notice, there was no response from the respondent.
2.5. On the basis of the terms of the Service Contract and the evidence available on record, more particularly Article 3(a) of the Service Contract, which provides that "Merchant shall tender not less than the MVC during the term hereof", the learned Arbitrator held the respondent did not fulfill its obligation under the Service Contract and passed an award as follows:
(a)Within thirty (30) days from the date of transmittal of this Award to the Parties, the Respondent shall pay to the Claimant, the sum of U.S.$25,725.00 (twenty five thousand seven hundred and twenty-five dollars), plus reasonable attorney's fees and costs.
(b)The compensation and expenses of the arbitrator totaling U.S.$ 2,000.00 shall be borne entirely by the Respondent. Therefore, Respondent shall pay to Claimant the sum of U.S. $1,000.00 (one thousand dollars), representing that portion of said compensation and expenses previously advanced by Claimant to the Association, and Respondent shall pay to the American Arbitration Association the sum of U.S. $1,000.00 (one thousand dollars), representing the balance of said compensation still due the Association.
(c)The administrative fees and expenses of the American Arbitration Association totaling U.S.$1,050.00 (one thousand fifty dollars) shall be borne entirely by the Respondent. Therefore, Respondent shall pay to Claimant the sum of U.S. $750.00 (seven hundred fifty dollars), representing that portion of said fees and expenses previously advanced by Claimant to the Association, and Respondent shall pay to the American Arbitration Association the sum of U.S. $300.00 (three hundred dollars), representing the balance of said fees and expenses still due the Association.
(d)This award is in full settlement of all claims submitted to this arbitration.
2.6. To enforce the above said award, the present Original Petition is filed, as stated above.
3. Though this original petition was presented on 28.10.2004, it was re-presented only on 30.10.2006. Notice in this petition was ordered on 17.8.2007. As service on the respondent through Court and post could not be effected, paper publication was ordered. Despite the same, the respondent has not chosen to appear before this Court through its representative or counsel. Hence, the name of the respondent is printed in the cause list. Even today, there is no representation on behalf of the respondent.
4. I have heard the submissions of Mr.N.L.Rajah, learned counsel for the petitioner and perused the award and documents filed in support of this original petition.
5. As stated above, this original petition has been filed under Section 47(1) read with Section 49 of the Act, which form part of Chapter I of Part II of the said Act that deals with "New York Convention Awards". The award in issue is a foreign award passed by the American Arbitration Association, International Arbitration Tribunal and the same is governed by the New York Convention.
6. Section 49 of the Act postulates that where the Court is satisfied that a foreign award is enforceable under Chapter I of Part II of the said Act, the award shall be deemed to be a decree of that Court. However, before enforcing a foreign award, the Court must be satisfied that the conditions specified in Section 48 of the Act, which specify the parameters under which the enforcement of foreign award can be refused, are not attracted. For better appreciation, it is apposite to refer to Section 48 of the Act which reads as under:
"Section 48. Conditions for enforcement of foreign awards.
(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that-
(a) The parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
(2) Enforcement of an arbitral award may also be refused if the court finds that-
(a) The subject-matter of the difference is not capable of settlement by arbitration under the law of India; or
(b) The enforcement of the award would be contrary to the public policy of India.
Explanation. -Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.
(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security."
7. The parameters that need to be considered for enforcement of foreign award have been enunciated by the Supreme Court in a recent decision in Shri Lal Mahal Ltd. v. Progetto Grano Spa,(2014) 2 SCC 433, wherein it was held as under:
"29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression public policy of India occurring in Section 34(2)(b)(ii) in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b)."
8. In the case on hand, the respondent has not chosen to appear before this Court to plead any of the conditions specified in Section 48 of the Act to refuse enforcement of the foreign award. The award, which is sought to be implemented, was passed based on a Service Contract entered into between the petitioner and the respondent in India on 29.10.2001, in respect of services to be rendered in India. In response to the notice sent by the petitioner, the respondent expressed his inability to comply with the terms of the contract. The respondent has acknowledged that he only tendered 26.5 FEUs to the petitioner out of the Minimum Volume Commitment of 100 FEUs and the same, apparently, is an infraction of the terms of the Service Contract, more particularly, Article 3(a) which provides that "Merchant shall tender not less than the MVC during the term hereof". The respondent never denied the liability. Thereafter, the arbitration clause was invoked in terms of the Service Contract and the award has been passed by an arbitrator appointed by the American Arbitration Association in terms of Article 4(a) of the Service Contract.
9. That apart, the parameters laid down by the Supreme Court in the decision referred supra for refusing to order enforcement of foreign award are not attracted to the facts of the present case, as the contract is entered into in India for the services rendered in India. The award is not against (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. The terms of the Service Contract are pure and simple and, in my considered opinion, they have been rightly interpreted by the Arbitrator.
10. Insofar as compliance of principles of natural justice is concerned, a perusal of the award shows that the Arbitrator sent notice of hearing to the parties on 18.3.2004. The respondent did not appear for hearing. The matter stood adjourned to 24.5.2004 and a notice of hearing was sent to the parties on 17.5.2004. Even on 24.5.2004, the respondent did not chose to appear and, therefore, the matter was adjourned to 12.7.2004 and in this regard notice of hearing was sent to the parties on 26.5.2004. Even on 12.7.2004, the respondent did not appear. To afford a last opportunity, the matter was kept open till 26.7.2004 and another notice was sent in this regard on 14.7.2004. However, the respondent did not respond to the notices and no written submissions were also filed. All these facts make it clear that the even though reasonable opportunity was given to the respondent to defend his case, they failed to avail of it.
11. In such view of the matter, this Court is of the firm view that the petitioner has satisfied the requirements contemplated under Section 47 of the Act and respondent has not chosen to furnish any proof in terms of Section 48 of the Act.
12. For the foregoing reasons, this Original Petition is allowed and the foreign award dated 13.8.2004 passed by Arbitrator is held enforceable and same shall be deemed to be a decree of this Court. The respondent is directed to make payment to the petitioner as per the award dated 13.8.2004 within four weeks, falling which the matter is to be posted before the learned Master for proceeding with the execution.
In the result, this Original Petition is allowed.
O.P.No.627 of 2007
1.4.2014
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