In Roger Shashoua & Others v. Mukesh Sharma & Others (2017) 14
SCC 722, the Supreme Court has clearly held that even if a party has wrongly
approached the Court in India and accepted the applicability of Part-I of the
Act, the same would not confer jurisdiction on Indian Courts.
“64. The other ground of attack is that the Appellants
had themselves approached the courts in India and,
therefore, by their own conduct applicability of Part I
has been accepted by the Appellants and the right to
raise the issue of jurisdiction has been waived.
…6
6. In Kanwar Singh Saini (supra), this Court has laid
down that conferment of jurisdiction is a legislative
function and it can neither be conferred with the
consent of the parties nor by a superior court, and if
the court passes an order/or a decree having no
jurisdiction over the matter, it would amount to a
nullity as the matter goes to the root of the cause. For
the said purpose the two-Judge Bench has placed
reliance upon United Commercial Bank Ltd. (supra),
State of Gujarat v. Rajesh Kumar Chimanlal Barot
EX.P. 271/2014 Page 15 of 18
Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v.
Savitribai Sopan Gujar and Collector of Central
Excise, Kanpur v. Flock (India) Pvt. Ltd.
67. In Zuari Cement Ltd. (supra), the Court ruled that
though the petitioner and the Corporation therein have
subjected themselves to the ESI Court, the same could
not confer jurisdiction upon the ESI Court to determine
the question of exemption from the operation of the
Act, for by consent, the parties cannot agree to vest
jurisdiction in a court to try the dispute which the court
does not possess.
68. In view of the aforesaid, there cannot be any trace
of doubt that any filing of an application by the
appellant in the courts in India can clothe such courts
with jurisdiction unless the law vests the same in
them.”
IN THE HIGH COURT OF DELHI AT NEW DELHI
Dated :1st November, 2018
EX.P. 271/2014
DRAGER MEDICAL Vs M/S ION BIO MED-I CARE PVT LTD
CORAM:
JUSTICE PRATHIBA M. SINGH
1. The present execution petition has been filed under Section 36 of the
Arbitration and Conciliation Act, 1996 (“the Act”) seeking execution of
ICC’s International Court of Arbitration award dated 29th June, 2012.
2. Drager Medical GmbH, the Decree Holder is a company engaged in
the business of manufacture, supply and sale of various medical equipment,
anesthesia equipment etc, which are highly specialised equipment used by
the medical profession in treatment of patients. M/s Ion Bio Med-I-Care Pvt.
Ltd. ( earlier known as Usha Drager Pvt. Ltd. ), the Judgment Debtor, is a
company, which was incorporated as a joint venture pursuant to a Joint
Venture agreement dated 9th May, 1987 between Dragerwerk AG and M/s
Usha Services Pvt Ltd, both of which had equal equity participation in the
Judgment Debtor. The Judgment Debtor was appointed as the exclusive
distributor in India of medical equipment manufactured by the Decree
Holder. A ‘Distributor Agreement’ to this effect dated 22nd February, 1999
was duly entered into between the parties. Supplies were made by the
Decree Holder to the Judgment Debtor from time to time. However, the
payments made by the Judgment Debtor company were irregular and
according to the decree holder there were several outstanding payments.
3. Disputes arose between the parties leading to the termination of the
Exclusive Distributor Agreement on 18th June, 2003. Several outstanding
payments were not made by the Judgment Debtor. The Decree Holder then
invoked arbitration by a letter dated 18th November, 2004 sent to the
International Court of Arbitration requesting for initiation of arbitration
proceedings. The Arbitral Tribunal passed award dated 29th June, 2012 in
favour of the Decree Holder. Subsequent to the award, the Decree Holder
filed a Section 9 petition seeking an injunction in respect of the assets of the
Judgment Debtor. Thereafter, an execution petition was also filed, seeking
enforcement of the arbitral award, however, the same was withdrawn. A
petition for winding up was also filed under Section 433 (e) of the
Companies Act, 1956. The same is stated to be pending before this Court.
4. On behalf of the Decree Holder Mr. Arvind Nayar, Ld. Senior
Counsel, submits that under Section 36 of the Act, once the time for making
an application to set aside the award expires, the award is enforceable as if it
was a decree of the Court. In the present case, as per the Decree Holder, the
time for challenging the award, i.e. three months, has expired, hence the
present execution petition has been filed seeking the following reliefs.
“a) Pass an order for execution of the award dated
29.06.2012 in favour of the Decree Holder and against
the Judgment Debtor directing the Judgment Debtor to
pay the Decree Holder a sum of EUR 4'994'873.81 =
INR 40,58,33,570.19 (Conversion taken to be 1
EUR=INR 81.25) along with interest @18% from
09.10.2012 till the realisation of decretal amount.
b) Issue warrants of attachment attaching the movable
and immovable properties of the Judgment Debtor and
the same may be sold towards satisfaction of the
Decretal Amount as mentioned hereinabove.
c) Issue warrants of arrest against the Directors and
all the persons in charge in day to day affairs of the
Company for detention to civil prison in terms of Order
XXI Rule 30 in the event of non payment of the
Decretal Amount.
d) Pass any other/further order/s or direction that this
Hon'ble Court may deem fit and proper in the interest
of justice.”
5. Notice was issued in the execution petition on 12th August, 2014. The
Judgment Debtor filed objections under Section 48 of the Act, alleging that
the award was a foreign award, and was not enforceable. In the said
application, the Judgement Debtor has set out reasons as to why the award
ought not to be enforced and as to why the Execution petition is also not
maintainable. On 4th September, 2018, when the matter was heard by this
Court, the counsel for the Decree Holder raised an objection that the
application under Section 48 of the Act is not maintainable, as the award in
the present case is a domestic award and hence the Judgment Debtor ought
to have challenged the said award under Section 34. The Judgment Debtor
having not challenged the award under Section 34 of the Act, cannot
maintain objections against the award under Section 48 of the Act. A
distinction is sought to be drawn between foreign awards and international
awards. According to learned Senior Counsel, Part-I of the Act would be
applicable in respect of international awards, if the arbitration takes place
within India. Thus, the objections ought to have been filed by the Judgment
Debtor under Section 34 of the Act. He relies on the judgment of the
Supreme Court in Bharat Aluminium Company v Kaiser Aluminium
Technical Services Ltd. (2012) 9 SCC 552 (hereinafter, ‘BALCO’).
6. On the other hand, learned counsel for the Judgment Debtor submits
that the award is not an international award to which Part I is applicable and
it is, in fact, a foreign award as per the Decree Holder’s admission. In the
earlier round of litigation between the parties, the Decree Holder itself
invoked Part II of the Act and reference to arbitration was made under
Section 45 of the Act. This round of litigation had travelled right till the
Supreme Court and the parties were referred to arbitration under Section 45.
This being the position, it cannot now be argued by the Decree Holder that
Part-I of the Act applies to the present facts. The award, being the outcome
of the reference under Section 45, the Decree Holder cannot argue that the
award has to be challenged under Section 34.
7. The arbitration agreement in the present case reads as under:
“26. Applicable Law
This Agreement shall be governed, construed and
interpreted in accordance with the German laws.
However, the cogent prescriptions concerning
(German) domestic “commercial agents” shall not
apply. The United Nations Convention on Contracts
for the International Sale of Goods shall not apply.
27. Arbitration
All disputes arising in connection with this present
Agreement shall be exclusively and finally settled
under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three
Arbitrators appointed in accordance with the said
Rules.
The award shall be in writing and shall contain the
reasons for the decision.
The language of the arbitration proceeding shall be
English.
The arbitration proceeding shall be held in New Delhi,
India.”
8. It is clear from a reading of the above clauses that the contract was to
be governed by the Rules of Conciliation and Arbitration of the ICC. The
venue of the proceedings was New Delhi. The agreement was governed by
German Law i.e. German Law was the substantive law of the contract (page
43 of pleadings). However, during the course of arbitral proceedings, parties
agreed that Indian law shall be the applicable law i.e., the substantive law of
the contract (Paras 131 and 132 of the Award). There is no dispute to this
position.
9. In the background of this clause, it is clear that as per section 2(2),
whenever the place of arbitration is in India, Part-I of the Act applies. This
is also the ratio of the Supreme Court in Bhatia International v Bulk
Trading SA (2002) 4 SCC 105 (hereinafter, ‘Bhatia International’). The
relevant paras of the judgment are extracted herein below:
“23. That the Legislature did not intend to exclude the
applicability of Part I to arbitrations, which take place
outside India, is further clear from certain other
provisions of the said Act. Sub-section (7) of Section 2
reads as follows:
(7) An arbitral award made under this Part shall be
considered as a domestic award.
As is set out hereinabove the said Act applies to (a)
arbitrations held in India between Indians (b)
international commercial arbitrations. As set out
hereinabove international commercial arbitrations
may take place in India or outside India. Outside India
an international commercial arbitration may be held in
a convention country or in a non-convention country.
The said Act however only classifies awards as
"domestic awards" or "foreign awards". Mr. Sen
admits that provisions of Part II makes it clear that
"foreign awards" are only those where the arbitration
takes place in a convention country. Awards in
arbitration proceedings which take place in a nonconvention
country are not considered to be "foreign
awards" under the said Act. They would thus not be
covered by Part II. An award passed in an arbitration
which takes place in India would be a "domestic
award". There would thus be no need to define an
award as a "domestic award" unless the intention was
to cover awards which would otherwise not be covered
by this definition. Strictly speaking an award passed in
an arbitration which takes place in a non-convention
country would not be a "domestic awards". Thus the
necessity is to define a "domestic award" as including
all awards made under Part I. The definition indicates
that an award made in an international commercial
arbitration held in a non-convention country is also
considered to be a "domestic award".
…3
2. To conclude we hold that the provisions of Part I
would apply to all arbitrations and to all proceedings
relating thereto. Where such arbitration is held in
India the provisions of Part I would compulsory apply
and parties are free to deviate only to the extent
permitted by the derogable provisions of Part I. In
cases of international commercial arbitrations 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.”
10. Learned Senior counsel for the Decree Holder has rightly relied upon
the judgment in BALCO (supra) to bring out the distinction between an
international award and foreign award. The relevant extract of the judgment
is set out hereinbelow:
“88. In our opinion, the aforesaid provision does not,
in any manner, relax the territorial principal adopted
by Arbitration Act, 1996. It certainly does not
introduce the concept of a delocalized arbitration into
the Arbitration Act, 1996. It must be remembered that
Part I of the Arbitration Act, 1996 applies not only to
purely domestic arbitrations, i.e., where none of the
parties are in any way “foreign” but also to
“international commercial arbitrations” covered
within Section 2(1)(f) held in India. The term
“domestic award” can be used in two senses: one to
distinguish it from “international award”, and the
other to distinguish it from a “foreign award”. It must
also be remembered that “foreign award” may well be
a domestic award in the country in which it is
rendered. As the whole of the Arbitration Act, 1996 is
designed to give different treatments to the awards
made in India and those made outside India, the
distinction is necessarily to be made between the terms
“domestic awards” and “foreign awards”. The
Scheme of the Arbitration Act, 1996 provides that Part
I shall apply to both “international arbitrations”
which take place in India as well as “domestic
arbitrations” which would normally take place in
India. This is clear from a number of provisions
contained in the Arbitration Act, 1996 viz. the
Preamble of the said Act; proviso and the explanation
to Section 1(2); Sections 2(1)(f); 11(9), 11(12);
28(1)(a) and 28(1)(b). All the aforesaid provisions,
which incorporate the term “international”, deal with
pre-award situation. The term “international award”
does not occur in Part I at all. Therefore, it would
appear that the term “domestic award” means an
award made in India whether in a purely domestic
context, i.e., domestically rendered award in a
domestic arbitration or in the international context,
i.e., domestically rendered award in an international
arbitration. Both the types of awards are liable to be
challenged under Section 34 and are enforceable
under Section 36 of the Arbitration Act, 1996.
Therefore, it seems clear that the object of Section
2(7) is to distinguish the domestic award covered
under Part I of the Arbitration Act, 1996 from the
“foreign award” covered under Part II of the
aforesaid Act; and not to distinguish the “domestic
award” from an “international award” rendered in
India. In other words, the provision highlights, if
anything, a clear distinction between Part I and Part II
as being applicable in completely different fields and
with no overlapping provisions.”
11. The above paragraph clearly distinguishes between an `international
award’ and a `foreign award’. In case of any international commercial
arbitration held outside India, an award arising from the same would be a
foreign award, if the seat of the arbitration is not in India. However, an
award passed in an international commercial arbitration held within India,
would be construed as a domestic award for the purposes of the Act. This is
clear, not only from the para from BALCO (supra) set out above, but also
Article 1 of the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 1958, also known as the New York Convention. The said
Article reads as under:
EX.P. 271/2014 Page 9 of 18
“ Article I
1. This Convention shall apply to the recognition and
enforcement of arbitral awards made in the territory of
a State other than the State where the recognition and
enforcement of such awards are sought, and arising
out of differences between persons, whether physical or
legal. It shall also apply to arbitral awards not
considered as domestic awards in the State where their
recognition and enforcement are sought.
2. The term “arbitral awards” shall include not only
awards made by arbitrators appointed for each case
but also those made by permanent arbitral bodies to
which the parties have submitted.
3. When signing, ratifying or acceding to this
Convention, or notifying extension under article X
hereof, any State may on the basis of reciprocity
declare that it will apply the Convention to the
recognition and enforcement of awards made only in
the territory of another Contracting State. It may also
declare that it will apply the Convention only to
differences arising out of legal relationships, whether
contractual or not, which are considered as
commercial under the national law of the State making
such declaration.”
12. A perusal of the above provisions shows that if an award is made in a
state other then the state where it is sought to be recognised, only such an
award becomes a ‘foreign award,’ to which the New York Convention
would be applicable. The provision also makes it clear that the Convention
would not apply to those awards which are considered as domestic awards in
the State where their recognition is sought.
13. In India, both Bhatia International (supra) and BALCO (supra) are
clear to the effect that where an international commercial arbitration is held
within India, Part-I of the Act would apply. This is also clear from a plain
EX.P. 271/2014 Page 10 of 18
reading of the Act. There is no conflict as to this principle irrespective of
whether Bhatia International (supra) applies or BALCO (supra) is applied.
Both these judgments are unanimous to the effect that if the arbitration takes
place in India, the award is a domestic award, even if the substantive law of
the contract is foreign law.
14. In the present case, the substantive law of the contract is Indian law.
The contract stipulates that the arbitral proceedings shall be held in New
Delhi, India. Thus, the award under challenge in the present case is a
domestic award, for all intent and purposes. However, the matter does not
end here. The clause does not specify as to what is the seat of the arbitration
agreement. Thus, it needs to be presumed that New Delhi is the agreed seat
of the arbitration.
15. The only remaining issue, as has been urged by the Judgment Debtor
is that in a suit filed by it seeking various reliefs against the Decree Holder,
an application seeking reference to arbitration in the present case was filed
by the Decree Holder under Section 45 of the Act. The Judgment Debtor
relies upon the said application filed by the Decree Holder, at the time when
the reference to arbitration was sought to be made i.e. I.A. No. 8159/2005 in
CS OS 1217/2005. In the said application, the Decree Holder had sought
reference to arbitration by a tribunal, which was to be appointed by the ICA
of the ICC. Para 3 of the I.A. 8159/2005, clearly records the fact that the
Tribunal was fully constituted by the ICC with three Arbitrators, comprising
the following:
1) Mr. Jean Marc Joerin
2) Mr. Justice M. J. Rao (Retd.)
3) Mr. Justice U P Singh (Retd.)
EX.P. 271/2014 Page 11 of 18
The prayer in the said application was based on the arbitration clause in the
Distribution Agreement, and the relief sought was as under.
“(a) Stay the present Suit bearing no.1217 of 2005
titled as M/s. Usha Drager Pvt. Limited and Ors. vs.
Dragerwork AG Ors.;
(b) refer the Plaintiff No.1 to arbitration as agreed in
the Distributor Agreement dated 22.02.1999 and
without prejudice to the ongoing arbitration
proceedings already commenced and the terms of
reference already approved by the International Court
of Arbitration of the International Chamber of
Commerce under the Arbitral Tribunal comprising of
Mr. Jean Mare Joerin, Chairman, Hon’ble Justice M J
Rao (retd.) and Hon’ble Justice U P Singh (retd.) as
co-arbitrators as per Clause 27 of the Distributor
Agreement dated 22.02.1999;
(c) Costs;”
16. The above application came to be decided by a learned Single Judge
of this Court. Vide order dated 17th January, 2006, while referring to
Sections 44 and 45 of the Act, and relying on the judgment of the Supreme
Court in Shin-Etsu Chemical Co. Ltd. v M/s Aksh Optifibre Ltd. and Anr.
(2005) 7 SCC 234, referred the parties to arbitration under Section 45 of the
Act. This judgment was rendered after the judgment of the Supreme Court in
Bhatia International (supra). It appears, in the said judgment, the
arguments were focussed on the question of whether some of the disputes
raised were arbitrable and whether there was a valid arbitration agreement. It
further appears that it was not brought to the notice of the Court that the
arbitral proceedings were to be held in India and hence in the absence of any
contrary intention between the parties, Part I would apply. In any event, at
the time the said judgment was passed, the arbitral tribunal was in the
EX.P. 271/2014 Page 12 of 18
process of being constituted. Thus, the learned Single Judge had, after
adjudicating the arbitrability of the disputes, observed as under:
“15. Accordingly, this application is allowed and the
parties are referred to arbitration. The disputes sought
to be raised in the present suit are, therefore, to be
settled by the Arbitral Tribunal. This application and
the suit stand disposed of.
Dasti.”
17. Vide judgment dated 17th January, 2006, the learned Single Judge
simply declared that the dispute ought to be settled by the arbitral tribunal
and, the parties were referred to the arbitration. The invocation of the
arbitration had already taken place by then. This order was confirmed by the
Division Bench and was also not interfered with by the Supreme Court.
18. The submission of the Judgment Debtor is that the Decree Holder
itself having invoked Section 45 at that stage, had thus admitted that the
proceedings under challenge would be governed by Part-II and not Part-I.
What would be the effect of such an admission, is the question. Can parties,
by their conduct, agree to treat a domestic award as a foreign award or vice
versa? Would the Court be bound by the conduct of the parties in such a
situation, is the question? The answer would be a categorical `NO’. The
question whether an award is a domestic award or a foreign award has to be
decided as per the provisions of the Act and settled judicial precedents.
19. The clear legal position, on the date when the reference was made,
was governed by the decision in Bhatia International (supra). Since the
arbitration was held in India, Part-I applied, and hence the award is a
domestic award. The answer to this legal issue has to be decided not on the
basis of a misunderstanding by any party but the stipulations contained in
EX.P. 271/2014 Page 13 of 18
the arbitration clause. It is, thus, held that the award in the present case is a
domestic award and the Judgment Debtor ought to have challenged the same
under Section 34 of the Act.
20. The next question is as to what would be the consequence of the
Judgement Debtor not raising a challenge to the award under Section 34
within the prescribed limitation period. Under Section 34(3) of the Act, a
period of 3 months plus a further period of 30 days (if the Court is satisfied
that the applicant was prevented by a sufficient cause from applying within
the stipulated period of 3 months), is provided for raising a challenge to the
arbitral award. Admittedly, the award was passed on 29th June, 2012. The
Judgment Debtor had notice of the said award and in fact, the Decree Holder
had filed an application under Section 9 of the Act seeking interim reliefs,
being OMP 777/2012. In the said OMP the Judgment Debtor had accepted
notice, as is evident from order dated 27th August, 2012. The Judgment
Debtor was directed to file an affidavit giving details of its movable and
immovable assets, bank statements etc, which it did on 16th October, 2012.
The Decree Holder had filed an execution petition, which it withdrew.
However, no notice of the said execution petition been issued to the
Judgment Debtor.
21. Thus, even as of August, 2012, the Judgment Debtor had notice of the
award. However, it chose not to take any steps to challenge the same. This
conduct of the Judgment Debtor is sought to be justified by arguing that the
Judgment Debtor presumed the award to be a foreign award, of which
enforcement was to be sought by the Decree Holder, by filing an application
under Section 48 of the Act. This was clearly a mistake by the Judgment
Debtor. However, it was based on the Decree Holder’s conduct of having
EX.P. 271/2014 Page 14 of 18
filed an application under Section 45 and invoking Section 45 of the Act at
the time of seeking reference. It is the settled position that an act of Court
cannot cause harm to any party. Further, the Decree Holder cannot be
allowed to take advantage of its own wrong. The maxim actus curiae
neminem gravabit would be of application here.
22. Should the Judgment Debtor, under such circumstances, be shown
any leniency in respect of the challenge to the award, as the award has not
yet been tested on the available grounds of challenge, either under Section
34 or Section 48 or should the award be enforced straightaway? This is the
question that has to be answered, i.e., as to whether such a mistake in law
can be condoned by the Court.
23. In Roger Shashoua & Others v. Mukesh Sharma & Others (2017) 14
SCC 722, the Supreme Court has clearly held that even if a party has wrongly
approached the Court in India and accepted the applicability of Part-I of the
Act, the same would not confer jurisdiction on Indian Courts.
“64. The other ground of attack is that the Appellants
had themselves approached the courts in India and,
therefore, by their own conduct applicability of Part I
has been accepted by the Appellants and the right to
raise the issue of jurisdiction has been waived.
…6
6. In Kanwar Singh Saini (supra), this Court has laid
down that conferment of jurisdiction is a legislative
function and it can neither be conferred with the
consent of the parties nor by a superior court, and if
the court passes an order/or a decree having no
jurisdiction over the matter, it would amount to a
nullity as the matter goes to the root of the cause. For
the said purpose the two-Judge Bench has placed
reliance upon United Commercial Bank Ltd. (supra),
State of Gujarat v. Rajesh Kumar Chimanlal Barot
EX.P. 271/2014 Page 15 of 18
Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v.
Savitribai Sopan Gujar and Collector of Central
Excise, Kanpur v. Flock (India) Pvt. Ltd.
67. In Zuari Cement Ltd. (supra), the Court ruled that
though the petitioner and the Corporation therein have
subjected themselves to the ESI Court, the same could
not confer jurisdiction upon the ESI Court to determine
the question of exemption from the operation of the
Act, for by consent, the parties cannot agree to vest
jurisdiction in a court to try the dispute which the court
does not possess.
68. In view of the aforesaid, there cannot be any trace
of doubt that any filing of an application by the
appellant in the courts in India can clothe such courts
with jurisdiction unless the law vests the same in
them.”
24. The situation in the present case is the reverse, i.e., the Decree holder
had admittedly invoked Section 45, under the assumption that the award
rendered would be a foreign award. However, the same is clearly a domestic
award, as per Bhatia International (supra), as the proceedings were held in
India and there was no implied or express exclusion of Part-I. Applying the
ratio of Roger Shashoua (supra), such conduct of a party cannot, by itself,
convert the award into a foreign award.
25. In the application under Section 48 filed by the Judgment Debtor,
various objections have been raised as to why the award ought not to be
enforced in India. The manner in which the application is drafted, is under
the presumption that the award is a foreign award. The Judgment Debtor
clearly had no opportunity to raise the challenge to the award in any forum,
under this confusion as to whether the award in this case is a domestic award
or a foreign award. It would be, in any event, contrary to public policy not
to permit challenge to the award. The narration of events set out above and
the position in law, leaves no doubt in the Court’s mind that the Judgment
Debtor deserves one opportunity to state its case challenging the award.
Considering that the Court, which referred the matter to the arbitration, as
also the Decree Holder, proceeded under the assumption that the award in
this case would be governed by Part-II, there can be no doubt that both
parties proceeded under the presumption that Part-II would apply. Thus,
there was a bona fide dispute on this issue.
26. The Judgment Debtor has raised various grounds in the application
under Section 48. Since the award has been held above to be a domestic
award, the said application is not maintainable.
27. The mechanisms for enforcement, and for challenging foreign awards
and domestic awards are very different. If the award is a foreign award, the
enforcement of the same is sought in India by the person relying upon the
award and seeking reliefs, under Section 48 read with Section 49. On the
other hand, in the case of a domestic award, the enforcement of the same is
as a decree if there is no challenge within the prescribed period. A person
who wishes to challenge a domestic award, has to approach the Court under
Section 34. In the case of a foreign award, the person who seeks to challenge
the same in India, can do so, when the same is sought to be enforced in
India. Thus, the Judgment Debtor, under the presumption that since the
reference was made under Section 45, the award was in fact a foreign award,
waited for the Decree Holder to seek enforcement of the award. However,
what the Decree Holder did in the present case was to treat the award as a
domestic award and straightway filed the execution petition after the
limitation period under Section 34 elapsed.
28. Thus, though prior to the passing of the award, both the parties
proceeded under the presumption that the proceedings are governed by Part-
II, in the execution petition, the Decree Holder has taken a stand that it is a
domestic award. Since there was an impossibility for the Judgment Debtor
to challenge the award, if it was a foreign award, and since it has been held
today by this Court, that the award is a domestic award, the limitation to
challenge the award, would begin from now.
29. In conclusion it is held:
i. That there is no implied or express exclusion of Part I of the Act;
ii. That the award dated 29th June 2012 passed by the International Court
of Arbitration of the ICC, is a `domestic award’ as the proceedings
were held in Delhi and the law governing the arbitration agreement
was not specifically mentioned. The seat of arbitration would thus be
Delhi.
iii. That the Decree Holder itself had earlier taken the stand that the
disputes are governed by Part II of the Act and the reference had
taken place under Section 45 of the Act – thus the understanding or
belief of the Judgement Debtor that the same is a `foreign award’ was
a bonafide error of law;
iv. The Judgement Debtor having not had an opportunity to challenge the
award under Section 34 of the Act, as it was under the bonafide belief
that the same is a `foreign award’, deserves to be given an opportunity
to avail of its legal remedies, upon this court declaring the award to be
a `domestic award’;
30. Accordingly, declaring the award in the present case to be a domestic
award, the application under Section 48, i.e. E.A. No.139/ 2015 is disposed
of in the above terms. The Judgment Debtor is permitted to avail its
remedies, in accordance with law.
EX.P. 271/2014
31.. List the execution petition for further proceedings on 4th Feb 2019.
PRATHIBA M. SINGH, J.
JUDGE
NOVEMBER 01, 2018
Print Page
SCC 722, the Supreme Court has clearly held that even if a party has wrongly
approached the Court in India and accepted the applicability of Part-I of the
Act, the same would not confer jurisdiction on Indian Courts.
“64. The other ground of attack is that the Appellants
had themselves approached the courts in India and,
therefore, by their own conduct applicability of Part I
has been accepted by the Appellants and the right to
raise the issue of jurisdiction has been waived.
…6
6. In Kanwar Singh Saini (supra), this Court has laid
down that conferment of jurisdiction is a legislative
function and it can neither be conferred with the
consent of the parties nor by a superior court, and if
the court passes an order/or a decree having no
jurisdiction over the matter, it would amount to a
nullity as the matter goes to the root of the cause. For
the said purpose the two-Judge Bench has placed
reliance upon United Commercial Bank Ltd. (supra),
State of Gujarat v. Rajesh Kumar Chimanlal Barot
EX.P. 271/2014 Page 15 of 18
Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v.
Savitribai Sopan Gujar and Collector of Central
Excise, Kanpur v. Flock (India) Pvt. Ltd.
67. In Zuari Cement Ltd. (supra), the Court ruled that
though the petitioner and the Corporation therein have
subjected themselves to the ESI Court, the same could
not confer jurisdiction upon the ESI Court to determine
the question of exemption from the operation of the
Act, for by consent, the parties cannot agree to vest
jurisdiction in a court to try the dispute which the court
does not possess.
68. In view of the aforesaid, there cannot be any trace
of doubt that any filing of an application by the
appellant in the courts in India can clothe such courts
with jurisdiction unless the law vests the same in
them.”
IN THE HIGH COURT OF DELHI AT NEW DELHI
Dated :1st November, 2018
EX.P. 271/2014
DRAGER MEDICAL Vs M/S ION BIO MED-I CARE PVT LTD
CORAM:
JUSTICE PRATHIBA M. SINGH
1. The present execution petition has been filed under Section 36 of the
Arbitration and Conciliation Act, 1996 (“the Act”) seeking execution of
ICC’s International Court of Arbitration award dated 29th June, 2012.
2. Drager Medical GmbH, the Decree Holder is a company engaged in
the business of manufacture, supply and sale of various medical equipment,
anesthesia equipment etc, which are highly specialised equipment used by
the medical profession in treatment of patients. M/s Ion Bio Med-I-Care Pvt.
Ltd. ( earlier known as Usha Drager Pvt. Ltd. ), the Judgment Debtor, is a
company, which was incorporated as a joint venture pursuant to a Joint
Venture agreement dated 9th May, 1987 between Dragerwerk AG and M/s
Usha Services Pvt Ltd, both of which had equal equity participation in the
Judgment Debtor. The Judgment Debtor was appointed as the exclusive
distributor in India of medical equipment manufactured by the Decree
Holder. A ‘Distributor Agreement’ to this effect dated 22nd February, 1999
was duly entered into between the parties. Supplies were made by the
Decree Holder to the Judgment Debtor from time to time. However, the
payments made by the Judgment Debtor company were irregular and
according to the decree holder there were several outstanding payments.
3. Disputes arose between the parties leading to the termination of the
Exclusive Distributor Agreement on 18th June, 2003. Several outstanding
payments were not made by the Judgment Debtor. The Decree Holder then
invoked arbitration by a letter dated 18th November, 2004 sent to the
International Court of Arbitration requesting for initiation of arbitration
proceedings. The Arbitral Tribunal passed award dated 29th June, 2012 in
favour of the Decree Holder. Subsequent to the award, the Decree Holder
filed a Section 9 petition seeking an injunction in respect of the assets of the
Judgment Debtor. Thereafter, an execution petition was also filed, seeking
enforcement of the arbitral award, however, the same was withdrawn. A
petition for winding up was also filed under Section 433 (e) of the
Companies Act, 1956. The same is stated to be pending before this Court.
4. On behalf of the Decree Holder Mr. Arvind Nayar, Ld. Senior
Counsel, submits that under Section 36 of the Act, once the time for making
an application to set aside the award expires, the award is enforceable as if it
was a decree of the Court. In the present case, as per the Decree Holder, the
time for challenging the award, i.e. three months, has expired, hence the
present execution petition has been filed seeking the following reliefs.
“a) Pass an order for execution of the award dated
29.06.2012 in favour of the Decree Holder and against
the Judgment Debtor directing the Judgment Debtor to
pay the Decree Holder a sum of EUR 4'994'873.81 =
INR 40,58,33,570.19 (Conversion taken to be 1
EUR=INR 81.25) along with interest @18% from
09.10.2012 till the realisation of decretal amount.
b) Issue warrants of attachment attaching the movable
and immovable properties of the Judgment Debtor and
the same may be sold towards satisfaction of the
Decretal Amount as mentioned hereinabove.
c) Issue warrants of arrest against the Directors and
all the persons in charge in day to day affairs of the
Company for detention to civil prison in terms of Order
XXI Rule 30 in the event of non payment of the
Decretal Amount.
d) Pass any other/further order/s or direction that this
Hon'ble Court may deem fit and proper in the interest
of justice.”
5. Notice was issued in the execution petition on 12th August, 2014. The
Judgment Debtor filed objections under Section 48 of the Act, alleging that
the award was a foreign award, and was not enforceable. In the said
application, the Judgement Debtor has set out reasons as to why the award
ought not to be enforced and as to why the Execution petition is also not
maintainable. On 4th September, 2018, when the matter was heard by this
Court, the counsel for the Decree Holder raised an objection that the
application under Section 48 of the Act is not maintainable, as the award in
the present case is a domestic award and hence the Judgment Debtor ought
to have challenged the said award under Section 34. The Judgment Debtor
having not challenged the award under Section 34 of the Act, cannot
maintain objections against the award under Section 48 of the Act. A
distinction is sought to be drawn between foreign awards and international
awards. According to learned Senior Counsel, Part-I of the Act would be
applicable in respect of international awards, if the arbitration takes place
within India. Thus, the objections ought to have been filed by the Judgment
Debtor under Section 34 of the Act. He relies on the judgment of the
Supreme Court in Bharat Aluminium Company v Kaiser Aluminium
Technical Services Ltd. (2012) 9 SCC 552 (hereinafter, ‘BALCO’).
6. On the other hand, learned counsel for the Judgment Debtor submits
that the award is not an international award to which Part I is applicable and
it is, in fact, a foreign award as per the Decree Holder’s admission. In the
earlier round of litigation between the parties, the Decree Holder itself
invoked Part II of the Act and reference to arbitration was made under
Section 45 of the Act. This round of litigation had travelled right till the
Supreme Court and the parties were referred to arbitration under Section 45.
This being the position, it cannot now be argued by the Decree Holder that
Part-I of the Act applies to the present facts. The award, being the outcome
of the reference under Section 45, the Decree Holder cannot argue that the
award has to be challenged under Section 34.
7. The arbitration agreement in the present case reads as under:
“26. Applicable Law
This Agreement shall be governed, construed and
interpreted in accordance with the German laws.
However, the cogent prescriptions concerning
(German) domestic “commercial agents” shall not
apply. The United Nations Convention on Contracts
for the International Sale of Goods shall not apply.
27. Arbitration
All disputes arising in connection with this present
Agreement shall be exclusively and finally settled
under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by three
Arbitrators appointed in accordance with the said
Rules.
The award shall be in writing and shall contain the
reasons for the decision.
The language of the arbitration proceeding shall be
English.
The arbitration proceeding shall be held in New Delhi,
India.”
8. It is clear from a reading of the above clauses that the contract was to
be governed by the Rules of Conciliation and Arbitration of the ICC. The
venue of the proceedings was New Delhi. The agreement was governed by
German Law i.e. German Law was the substantive law of the contract (page
43 of pleadings). However, during the course of arbitral proceedings, parties
agreed that Indian law shall be the applicable law i.e., the substantive law of
the contract (Paras 131 and 132 of the Award). There is no dispute to this
position.
9. In the background of this clause, it is clear that as per section 2(2),
whenever the place of arbitration is in India, Part-I of the Act applies. This
is also the ratio of the Supreme Court in Bhatia International v Bulk
Trading SA (2002) 4 SCC 105 (hereinafter, ‘Bhatia International’). The
relevant paras of the judgment are extracted herein below:
“23. That the Legislature did not intend to exclude the
applicability of Part I to arbitrations, which take place
outside India, is further clear from certain other
provisions of the said Act. Sub-section (7) of Section 2
reads as follows:
(7) An arbitral award made under this Part shall be
considered as a domestic award.
As is set out hereinabove the said Act applies to (a)
arbitrations held in India between Indians (b)
international commercial arbitrations. As set out
hereinabove international commercial arbitrations
may take place in India or outside India. Outside India
an international commercial arbitration may be held in
a convention country or in a non-convention country.
The said Act however only classifies awards as
"domestic awards" or "foreign awards". Mr. Sen
admits that provisions of Part II makes it clear that
"foreign awards" are only those where the arbitration
takes place in a convention country. Awards in
arbitration proceedings which take place in a nonconvention
country are not considered to be "foreign
awards" under the said Act. They would thus not be
covered by Part II. An award passed in an arbitration
which takes place in India would be a "domestic
award". There would thus be no need to define an
award as a "domestic award" unless the intention was
to cover awards which would otherwise not be covered
by this definition. Strictly speaking an award passed in
an arbitration which takes place in a non-convention
country would not be a "domestic awards". Thus the
necessity is to define a "domestic award" as including
all awards made under Part I. The definition indicates
that an award made in an international commercial
arbitration held in a non-convention country is also
considered to be a "domestic award".
…3
2. To conclude we hold that the provisions of Part I
would apply to all arbitrations and to all proceedings
relating thereto. Where such arbitration is held in
India the provisions of Part I would compulsory apply
and parties are free to deviate only to the extent
permitted by the derogable provisions of Part I. In
cases of international commercial arbitrations 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.”
10. Learned Senior counsel for the Decree Holder has rightly relied upon
the judgment in BALCO (supra) to bring out the distinction between an
international award and foreign award. The relevant extract of the judgment
is set out hereinbelow:
“88. In our opinion, the aforesaid provision does not,
in any manner, relax the territorial principal adopted
by Arbitration Act, 1996. It certainly does not
introduce the concept of a delocalized arbitration into
the Arbitration Act, 1996. It must be remembered that
Part I of the Arbitration Act, 1996 applies not only to
purely domestic arbitrations, i.e., where none of the
parties are in any way “foreign” but also to
“international commercial arbitrations” covered
within Section 2(1)(f) held in India. The term
“domestic award” can be used in two senses: one to
distinguish it from “international award”, and the
other to distinguish it from a “foreign award”. It must
also be remembered that “foreign award” may well be
a domestic award in the country in which it is
rendered. As the whole of the Arbitration Act, 1996 is
designed to give different treatments to the awards
made in India and those made outside India, the
distinction is necessarily to be made between the terms
“domestic awards” and “foreign awards”. The
Scheme of the Arbitration Act, 1996 provides that Part
I shall apply to both “international arbitrations”
which take place in India as well as “domestic
arbitrations” which would normally take place in
India. This is clear from a number of provisions
contained in the Arbitration Act, 1996 viz. the
Preamble of the said Act; proviso and the explanation
to Section 1(2); Sections 2(1)(f); 11(9), 11(12);
28(1)(a) and 28(1)(b). All the aforesaid provisions,
which incorporate the term “international”, deal with
pre-award situation. The term “international award”
does not occur in Part I at all. Therefore, it would
appear that the term “domestic award” means an
award made in India whether in a purely domestic
context, i.e., domestically rendered award in a
domestic arbitration or in the international context,
i.e., domestically rendered award in an international
arbitration. Both the types of awards are liable to be
challenged under Section 34 and are enforceable
under Section 36 of the Arbitration Act, 1996.
Therefore, it seems clear that the object of Section
2(7) is to distinguish the domestic award covered
under Part I of the Arbitration Act, 1996 from the
“foreign award” covered under Part II of the
aforesaid Act; and not to distinguish the “domestic
award” from an “international award” rendered in
India. In other words, the provision highlights, if
anything, a clear distinction between Part I and Part II
as being applicable in completely different fields and
with no overlapping provisions.”
11. The above paragraph clearly distinguishes between an `international
award’ and a `foreign award’. In case of any international commercial
arbitration held outside India, an award arising from the same would be a
foreign award, if the seat of the arbitration is not in India. However, an
award passed in an international commercial arbitration held within India,
would be construed as a domestic award for the purposes of the Act. This is
clear, not only from the para from BALCO (supra) set out above, but also
Article 1 of the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 1958, also known as the New York Convention. The said
Article reads as under:
EX.P. 271/2014 Page 9 of 18
“ Article I
1. This Convention shall apply to the recognition and
enforcement of arbitral awards made in the territory of
a State other than the State where the recognition and
enforcement of such awards are sought, and arising
out of differences between persons, whether physical or
legal. It shall also apply to arbitral awards not
considered as domestic awards in the State where their
recognition and enforcement are sought.
2. The term “arbitral awards” shall include not only
awards made by arbitrators appointed for each case
but also those made by permanent arbitral bodies to
which the parties have submitted.
3. When signing, ratifying or acceding to this
Convention, or notifying extension under article X
hereof, any State may on the basis of reciprocity
declare that it will apply the Convention to the
recognition and enforcement of awards made only in
the territory of another Contracting State. It may also
declare that it will apply the Convention only to
differences arising out of legal relationships, whether
contractual or not, which are considered as
commercial under the national law of the State making
such declaration.”
12. A perusal of the above provisions shows that if an award is made in a
state other then the state where it is sought to be recognised, only such an
award becomes a ‘foreign award,’ to which the New York Convention
would be applicable. The provision also makes it clear that the Convention
would not apply to those awards which are considered as domestic awards in
the State where their recognition is sought.
13. In India, both Bhatia International (supra) and BALCO (supra) are
clear to the effect that where an international commercial arbitration is held
within India, Part-I of the Act would apply. This is also clear from a plain
EX.P. 271/2014 Page 10 of 18
reading of the Act. There is no conflict as to this principle irrespective of
whether Bhatia International (supra) applies or BALCO (supra) is applied.
Both these judgments are unanimous to the effect that if the arbitration takes
place in India, the award is a domestic award, even if the substantive law of
the contract is foreign law.
14. In the present case, the substantive law of the contract is Indian law.
The contract stipulates that the arbitral proceedings shall be held in New
Delhi, India. Thus, the award under challenge in the present case is a
domestic award, for all intent and purposes. However, the matter does not
end here. The clause does not specify as to what is the seat of the arbitration
agreement. Thus, it needs to be presumed that New Delhi is the agreed seat
of the arbitration.
15. The only remaining issue, as has been urged by the Judgment Debtor
is that in a suit filed by it seeking various reliefs against the Decree Holder,
an application seeking reference to arbitration in the present case was filed
by the Decree Holder under Section 45 of the Act. The Judgment Debtor
relies upon the said application filed by the Decree Holder, at the time when
the reference to arbitration was sought to be made i.e. I.A. No. 8159/2005 in
CS OS 1217/2005. In the said application, the Decree Holder had sought
reference to arbitration by a tribunal, which was to be appointed by the ICA
of the ICC. Para 3 of the I.A. 8159/2005, clearly records the fact that the
Tribunal was fully constituted by the ICC with three Arbitrators, comprising
the following:
1) Mr. Jean Marc Joerin
2) Mr. Justice M. J. Rao (Retd.)
3) Mr. Justice U P Singh (Retd.)
EX.P. 271/2014 Page 11 of 18
The prayer in the said application was based on the arbitration clause in the
Distribution Agreement, and the relief sought was as under.
“(a) Stay the present Suit bearing no.1217 of 2005
titled as M/s. Usha Drager Pvt. Limited and Ors. vs.
Dragerwork AG Ors.;
(b) refer the Plaintiff No.1 to arbitration as agreed in
the Distributor Agreement dated 22.02.1999 and
without prejudice to the ongoing arbitration
proceedings already commenced and the terms of
reference already approved by the International Court
of Arbitration of the International Chamber of
Commerce under the Arbitral Tribunal comprising of
Mr. Jean Mare Joerin, Chairman, Hon’ble Justice M J
Rao (retd.) and Hon’ble Justice U P Singh (retd.) as
co-arbitrators as per Clause 27 of the Distributor
Agreement dated 22.02.1999;
(c) Costs;”
16. The above application came to be decided by a learned Single Judge
of this Court. Vide order dated 17th January, 2006, while referring to
Sections 44 and 45 of the Act, and relying on the judgment of the Supreme
Court in Shin-Etsu Chemical Co. Ltd. v M/s Aksh Optifibre Ltd. and Anr.
(2005) 7 SCC 234, referred the parties to arbitration under Section 45 of the
Act. This judgment was rendered after the judgment of the Supreme Court in
Bhatia International (supra). It appears, in the said judgment, the
arguments were focussed on the question of whether some of the disputes
raised were arbitrable and whether there was a valid arbitration agreement. It
further appears that it was not brought to the notice of the Court that the
arbitral proceedings were to be held in India and hence in the absence of any
contrary intention between the parties, Part I would apply. In any event, at
the time the said judgment was passed, the arbitral tribunal was in the
EX.P. 271/2014 Page 12 of 18
process of being constituted. Thus, the learned Single Judge had, after
adjudicating the arbitrability of the disputes, observed as under:
“15. Accordingly, this application is allowed and the
parties are referred to arbitration. The disputes sought
to be raised in the present suit are, therefore, to be
settled by the Arbitral Tribunal. This application and
the suit stand disposed of.
Dasti.”
17. Vide judgment dated 17th January, 2006, the learned Single Judge
simply declared that the dispute ought to be settled by the arbitral tribunal
and, the parties were referred to the arbitration. The invocation of the
arbitration had already taken place by then. This order was confirmed by the
Division Bench and was also not interfered with by the Supreme Court.
18. The submission of the Judgment Debtor is that the Decree Holder
itself having invoked Section 45 at that stage, had thus admitted that the
proceedings under challenge would be governed by Part-II and not Part-I.
What would be the effect of such an admission, is the question. Can parties,
by their conduct, agree to treat a domestic award as a foreign award or vice
versa? Would the Court be bound by the conduct of the parties in such a
situation, is the question? The answer would be a categorical `NO’. The
question whether an award is a domestic award or a foreign award has to be
decided as per the provisions of the Act and settled judicial precedents.
19. The clear legal position, on the date when the reference was made,
was governed by the decision in Bhatia International (supra). Since the
arbitration was held in India, Part-I applied, and hence the award is a
domestic award. The answer to this legal issue has to be decided not on the
basis of a misunderstanding by any party but the stipulations contained in
EX.P. 271/2014 Page 13 of 18
the arbitration clause. It is, thus, held that the award in the present case is a
domestic award and the Judgment Debtor ought to have challenged the same
under Section 34 of the Act.
20. The next question is as to what would be the consequence of the
Judgement Debtor not raising a challenge to the award under Section 34
within the prescribed limitation period. Under Section 34(3) of the Act, a
period of 3 months plus a further period of 30 days (if the Court is satisfied
that the applicant was prevented by a sufficient cause from applying within
the stipulated period of 3 months), is provided for raising a challenge to the
arbitral award. Admittedly, the award was passed on 29th June, 2012. The
Judgment Debtor had notice of the said award and in fact, the Decree Holder
had filed an application under Section 9 of the Act seeking interim reliefs,
being OMP 777/2012. In the said OMP the Judgment Debtor had accepted
notice, as is evident from order dated 27th August, 2012. The Judgment
Debtor was directed to file an affidavit giving details of its movable and
immovable assets, bank statements etc, which it did on 16th October, 2012.
The Decree Holder had filed an execution petition, which it withdrew.
However, no notice of the said execution petition been issued to the
Judgment Debtor.
21. Thus, even as of August, 2012, the Judgment Debtor had notice of the
award. However, it chose not to take any steps to challenge the same. This
conduct of the Judgment Debtor is sought to be justified by arguing that the
Judgment Debtor presumed the award to be a foreign award, of which
enforcement was to be sought by the Decree Holder, by filing an application
under Section 48 of the Act. This was clearly a mistake by the Judgment
Debtor. However, it was based on the Decree Holder’s conduct of having
EX.P. 271/2014 Page 14 of 18
filed an application under Section 45 and invoking Section 45 of the Act at
the time of seeking reference. It is the settled position that an act of Court
cannot cause harm to any party. Further, the Decree Holder cannot be
allowed to take advantage of its own wrong. The maxim actus curiae
neminem gravabit would be of application here.
22. Should the Judgment Debtor, under such circumstances, be shown
any leniency in respect of the challenge to the award, as the award has not
yet been tested on the available grounds of challenge, either under Section
34 or Section 48 or should the award be enforced straightaway? This is the
question that has to be answered, i.e., as to whether such a mistake in law
can be condoned by the Court.
23. In Roger Shashoua & Others v. Mukesh Sharma & Others (2017) 14
SCC 722, the Supreme Court has clearly held that even if a party has wrongly
approached the Court in India and accepted the applicability of Part-I of the
Act, the same would not confer jurisdiction on Indian Courts.
“64. The other ground of attack is that the Appellants
had themselves approached the courts in India and,
therefore, by their own conduct applicability of Part I
has been accepted by the Appellants and the right to
raise the issue of jurisdiction has been waived.
…6
6. In Kanwar Singh Saini (supra), this Court has laid
down that conferment of jurisdiction is a legislative
function and it can neither be conferred with the
consent of the parties nor by a superior court, and if
the court passes an order/or a decree having no
jurisdiction over the matter, it would amount to a
nullity as the matter goes to the root of the cause. For
the said purpose the two-Judge Bench has placed
reliance upon United Commercial Bank Ltd. (supra),
State of Gujarat v. Rajesh Kumar Chimanlal Barot
EX.P. 271/2014 Page 15 of 18
Kesar Singh v. Sadhu, Kondiba Dagadu Kadam v.
Savitribai Sopan Gujar and Collector of Central
Excise, Kanpur v. Flock (India) Pvt. Ltd.
67. In Zuari Cement Ltd. (supra), the Court ruled that
though the petitioner and the Corporation therein have
subjected themselves to the ESI Court, the same could
not confer jurisdiction upon the ESI Court to determine
the question of exemption from the operation of the
Act, for by consent, the parties cannot agree to vest
jurisdiction in a court to try the dispute which the court
does not possess.
68. In view of the aforesaid, there cannot be any trace
of doubt that any filing of an application by the
appellant in the courts in India can clothe such courts
with jurisdiction unless the law vests the same in
them.”
24. The situation in the present case is the reverse, i.e., the Decree holder
had admittedly invoked Section 45, under the assumption that the award
rendered would be a foreign award. However, the same is clearly a domestic
award, as per Bhatia International (supra), as the proceedings were held in
India and there was no implied or express exclusion of Part-I. Applying the
ratio of Roger Shashoua (supra), such conduct of a party cannot, by itself,
convert the award into a foreign award.
25. In the application under Section 48 filed by the Judgment Debtor,
various objections have been raised as to why the award ought not to be
enforced in India. The manner in which the application is drafted, is under
the presumption that the award is a foreign award. The Judgment Debtor
clearly had no opportunity to raise the challenge to the award in any forum,
under this confusion as to whether the award in this case is a domestic award
or a foreign award. It would be, in any event, contrary to public policy not
to permit challenge to the award. The narration of events set out above and
the position in law, leaves no doubt in the Court’s mind that the Judgment
Debtor deserves one opportunity to state its case challenging the award.
Considering that the Court, which referred the matter to the arbitration, as
also the Decree Holder, proceeded under the assumption that the award in
this case would be governed by Part-II, there can be no doubt that both
parties proceeded under the presumption that Part-II would apply. Thus,
there was a bona fide dispute on this issue.
26. The Judgment Debtor has raised various grounds in the application
under Section 48. Since the award has been held above to be a domestic
award, the said application is not maintainable.
27. The mechanisms for enforcement, and for challenging foreign awards
and domestic awards are very different. If the award is a foreign award, the
enforcement of the same is sought in India by the person relying upon the
award and seeking reliefs, under Section 48 read with Section 49. On the
other hand, in the case of a domestic award, the enforcement of the same is
as a decree if there is no challenge within the prescribed period. A person
who wishes to challenge a domestic award, has to approach the Court under
Section 34. In the case of a foreign award, the person who seeks to challenge
the same in India, can do so, when the same is sought to be enforced in
India. Thus, the Judgment Debtor, under the presumption that since the
reference was made under Section 45, the award was in fact a foreign award,
waited for the Decree Holder to seek enforcement of the award. However,
what the Decree Holder did in the present case was to treat the award as a
domestic award and straightway filed the execution petition after the
limitation period under Section 34 elapsed.
28. Thus, though prior to the passing of the award, both the parties
proceeded under the presumption that the proceedings are governed by Part-
II, in the execution petition, the Decree Holder has taken a stand that it is a
domestic award. Since there was an impossibility for the Judgment Debtor
to challenge the award, if it was a foreign award, and since it has been held
today by this Court, that the award is a domestic award, the limitation to
challenge the award, would begin from now.
29. In conclusion it is held:
i. That there is no implied or express exclusion of Part I of the Act;
ii. That the award dated 29th June 2012 passed by the International Court
of Arbitration of the ICC, is a `domestic award’ as the proceedings
were held in Delhi and the law governing the arbitration agreement
was not specifically mentioned. The seat of arbitration would thus be
Delhi.
iii. That the Decree Holder itself had earlier taken the stand that the
disputes are governed by Part II of the Act and the reference had
taken place under Section 45 of the Act – thus the understanding or
belief of the Judgement Debtor that the same is a `foreign award’ was
a bonafide error of law;
iv. The Judgement Debtor having not had an opportunity to challenge the
award under Section 34 of the Act, as it was under the bonafide belief
that the same is a `foreign award’, deserves to be given an opportunity
to avail of its legal remedies, upon this court declaring the award to be
a `domestic award’;
30. Accordingly, declaring the award in the present case to be a domestic
award, the application under Section 48, i.e. E.A. No.139/ 2015 is disposed
of in the above terms. The Judgment Debtor is permitted to avail its
remedies, in accordance with law.
EX.P. 271/2014
31.. List the execution petition for further proceedings on 4th Feb 2019.
PRATHIBA M. SINGH, J.
JUDGE
NOVEMBER 01, 2018
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