the earlier round regarding the maintainability of the
execution case could not have been considered in isolation
and de hors the issue of enforceability of the subject foreign
awards. For, the same was intrinsically linked to the question
of enforceability of the subject foreign awards. In any case, all
contentions available to the petitioner in that regard could and
ought to have been raised specifically and, if raised, could
have been examined by the Court at that stage itself. We are of
the considered opinion that the scheme of Section 48 of the
Act does not envisage piecemeal consideration of the issue of
maintainability of the execution case concerning the foreign
awards, in the first place; and then the issue of enforceability
thereof. Whereas, keeping in mind the legislative intent of
speedy disposal of arbitration proceedings and limited
interference by the courts, the Court is expected to consider
both these aspects simultaneously at the threshold. Taking
any other view would result in encouraging successive and
multiple round of proceedings for the execution of foreign
awards. We cannot countenance such a situation keeping in
mind the avowed object of the Arbitration and Conciliation Act,
1996, in particular, while dealing with the enforcement of
foreign awards. For, the scope of interference has been
consciously constricted by the legislature in relation to the
execution of foreign awards. Therefore, the subject application
filed by the petitioner deserves to be rejected, being barred by
constructive res judicata, as has been justly observed by the
High Court in the impugned judgment.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NO. 540 OF 2018
LMJ International Ltd. Vs Sleepwell Industries Co. Ltd.
Dated:February 20, 2019.
A.M. Khanwilkar, J.
1. These special leave petitions emanate from the judgment
and orders dated 22nd August, 2017 passed by the High Court
at Calcutta in G.A. No.3306/2016 in E.C. No.487/2013 and
dated 9th July, 2018 in G.A. No.3307/2016 in E.C.
2
No.488/2013, respectively. The special leave petitions pertain
to two execution petitions filed by the respondent – award
holder concerning two separate foreign awards. Since the
questions raised in both these petitions are overlapping, the
same are being answered together.
2. The parties had entered into separate contracts for
sale of Non Basmati Parboiled Rice, Thailand origin, on
the terms and conditions specified in the contracts. The
contract contained a stipulation that the quantity would
be final at the Port of loading as per the official weight
certificate issued by SGS at the cost of the seller,
meaning thereby the respondent. The consignments were
shipped by the seller as per the said contract. The
contract was an FOB contract and the goods were meant
for the Government of People’s Republic of Bangladesh.
The contract in “other terms” envisage that on terms and
conditions not in contradiction with the stipulated terms
of contract shall be governed by GAFTA 48 and disputes
to be resolved by Arbitration 125 as per GAFTA 125 in
3
London. The buyer had opened letters of credit on
different dates and the consignments were shipped by
the seller. For each single shipment, invoices had been
issued by the seller in accordance with the addendum to
the contract. Shorn of unnecessary details, be it noted
that some dispute arose regarding the inferior quality of
rice and nonrelease
of the payment towards the invoices
raised by the seller in respect of certain shipment, which
eventually became the subject matter of arbitration
proceedings. The respondent, on 28th July, 2011, invoked
the arbitration clause and eventually appointed Mr. R.
Barber as its Arbitrator. As the petitioner failed to
respond, the respondent requested GAFTA to appoint an
arbitrator on their behalf in accordance with GAFTA
Arbitration Rules 125. GAFTA duly appointed Mr. R.
Eikel as the second Arbitrator on 22nd September, 2011.
On 25th June, 2012 GAFTA appointed Mr. C. Debattista
as the third Arbitrator and Chairman of the Tribunal.
4
3. The respondent filed its claim submissions dated
11th May, 2012 in the two independent arbitration
proceedings, concerning contractI
and contractII,
respectively. These claim submissions came to be filed
after giving various opportunities to the petitioner.
Resultantly, the Arbitral Tribunal passed two separate
awards in relation to the concerned contracts, being
Arbitration Case No.14/456 (pertaining to contractI)
and
Arbitration Case No.14/457 (pertaining to contractII).
Be it noted that the Arbitral Tribunal proceeded exparte
against the petitioner as, despite notice, the petitioner
refused to participate in the arbitration proceedings.
Neither did it file any statement of defence or
counterclaim nor did it adduce any evidence.
4. On 19th November, 2013, the respondent filed two
execution cases, being Execution Case No.487/2013
(pertaining to contractI)
and Execution Case No.488/2013
(pertaining to contractII),
under PartII
of the Arbitration and
Conciliation Act, 1996 (for short “the Act”), before the High
5
Court at Calcutta for enforcement of the foreign arbitral
awards. The learned Single Judge of the High Court passed a
common order in the said execution cases rejecting the
objection purportedly regarding the maintainability of the
subject foreign awards vide judgment and order dated 4th
December, 2014. The learned Single Judge noted that the
petitioner did not file any affidavit or formal application to
oppose the execution case, but chose to raise objections orally,
only through his counsel, before the Court. The Single Judge
noted the objections of the petitioner. The Court also noted
that the Court ought to be satisfied that the foreign award was
enforceable and must record its satisfaction in that regard,
consequent to which, in view of Section 48 of the Act, the
award shall be deemed to be a decree of the Court. The
learned Single Judge then went on to record the five objections
taken on behalf of the petitioner through its counsel, which
read thus:
“The first objection raised is that no prayer for declaration
has been made in the application that the foreign award is
enforceable. It is submitted that unless prayer is made
seeking a declaration as to the enforcement of the award, the
Court cannot assume jurisdiction. In this regard the learned
6
Senior Counsel has referred to a Single Bench decision of the
Bombay High Court in the case of Toepfer International Asia
Pvt. Ltd. versus Thapar Ispat Ltd., reported in 2000 (1) Arb.
LR 230 (Bombay) paragraph 19.
The second objection is that a civil suit is pending between
the parties in which there is a categorical observation both
by the learned Single Judge as well as the Division Bench
that any action taken by the parties to the suit during the
pendency of the suit shall be subject to and abide by the
result of the suit. It is submitted that a cross appeal was
preferred by the decreeholder
and this observation of the
learned Single Judge was not interfered with and accordingly
the execution application is premature and unless the suit is
decided, the award does not attain its finality.
The third objection is that the arbitration clause has not
been properly invoked. It is submitted that arbitration clause
is a twotier
clause. Before the arbitration clause could be
invoked, the parties are required to first make an attempt to
amicably settle their disputes and only upon failure, the
parties could refer their disputes to the arbitration as per
GAFTA clause for rice and arbitration rules 125. It is
submitted that there is no averment in the petition that
before invoking the arbitration clause there was any attempt
to settle the disputes amicably. Since this stage has not been
reached, the invocation of Arbitration Clause is void ab
initio. In this regard, the learned Senior Counsel has referred
to an unreported decision of a single Bench of this Court in
AP 112 of 2008 [Waidhan Engineering & Industries Private
Limited vs. The Board Of Trustees For The Port Of Kolkata]
decided on 5th May 2010.
The fourth objection is that even if it is assumed for the sake
of argument that this amicable settlement was not followed,
even then Rule 3.1 was not followed with regard to the
appointment of the sole Arbitrator. It is submitted that it was
incumbent upon the decreeholder
to inform the respondent
about the appointment of a sole arbitrator and it was only on
refusal to accede to such request that other procedures
prescribed under the rules shall follow.
The fifth and the last objection appears to be that the
nominee arbitrator of the respondent was appointed de hors
the provisions of GAFTA Rules and accordingly the
7
procedure adopted is irregular from the very beginning and
the award is not enforceable.”
5. After considering the rival submissions, the Court
rejected the aforementioned objections on the finding that the
legislative intent underlying the Act was to circumscribe the
supervisory role of the Court in arbitral proceedings and that
it predicated limited interference. Further, it went on to
observe that the objections raised by the petitioner were in a
quagmire of despondency and a desperate attempt to resist the
enforceability of an enforceable award rather than being any
real challenge thrown towards the maintainability of the said
petition. These observations would assume relevance because
in the special leave petitions filed against the said common
judgment dated 4th December, 2014, the questions of law and
grounds articulated resonate with the objections taken by the
petitioner regarding the subject foreign awards being
enforceable or otherwise. To wit, the questions of law and
grounds urged in Special Leave Petition (Civil) No.5612 of 2015
(pertaining to contractI)
read thus:
“QUESTIONS OF LAW :
8
That the following questions of law of general and
public importance arise for consideration of his Hon’ble
Court :i)
Whether any order in an execution proceeding can be
passed before the Court is called upon to decide and declare
that the award is enforceable?
ii) Whether any declaration as to the enforceability of a
foreign award is to be sought by the award holder before
seeking to enforce the foreign award?
iii) Whether a foreign award which arises out of an
arbitration agreement which is under challenge in a properly
instituted civil suit, can be put to execution before the suit is
heard and disposed of?
iv) Whether valid and proper invocation of the arbitration
clause is a prerequisite
before seeking to enforce the foreign
award arising out of the arbitration agreement between the
parties?
v) Whether in a twotier
arbitration mechanism, it is
necessary to exhaust the firsttier
(i.e. negotiation) before
proceeding to formally commence the reference?
vi) Whether the executing Court can assume jurisdiction
without there being a declaration as to the enforcement of
the foreign award?
vii) Whether the execution of the foreign award was
premature before the outcome of the civil suit filed by the
appellant?
viii) Whether the invocation of the arbitration clause was
properly done by the awardholder?
ix) Whether the Arbitral Tribunal rightly applied the rules,
principles and practice of GAFTA Arbitration Rules while
delivering the foreign award?
x) Whether an awardholder
can seek to apply for
execution of a foreign award without first complying with the
conditions laid down in Section 48 of the 1996 Act?
xi) Whether a foreign award can be said to be enforceable
merely upon production of original award and a duly
certified copy of the arbitration agreement?
xii) Whether it is necessary to file a formal application under
Section 48 of the 1996 Act to resist the foreign award or
objections as to the enforceability of a foreign award can be
made even otherwise?
xiii) Whether recourse to Section 49 of the Arbitration &
Conciliation Act, 1996 can be taken without satisfying the
test laid down in Section 48 of the 1996 Act?
9
xiv) Whether the executing court can pass any order in aid
of execution despite the pendency of a properly instituted
civil suit which challenges the very basis of a purported
foreign award?
xv) Whether the executing court an substantive pass orders
in the execution ignoring the pendency of the civil suit and
the observation of the Division Bench of the Calcutta High
Court to the effect that “any action taken by the parties to
the suit during its pendency shall be subject to and abide by
the result of the suit?
xvi) Whether the executability of the foreign award can be
decided without allowing the award debtor to file its affidavit
or its objection in writing to defend a purported foreign
award?
xvii) Whether any interim order can be passed in favour of
a party relying upon a purported foreign award without going
into at all the objections raised by the petitioner?
GROUNDS
a) For that the impugned order is untenable in law and facts
of the present case.
b) For that the impugned order has been passed without
giving any opportunity to the petitioner to file its affidavit or
put its objection in writing to the executability of the foreign
award.
c) For that the impugned order has been passed by a Single
Judge of the Calcutta High Court totally ignoring the effect of
the observation and finding of an order passed by another
Single Judge of the Hon’ble High Court duly affirmed by the
Division Bench arise out of a previously instituted civil suit.
d) For that there was no prima facie case in favour of the
respondent and no interim order could have been granted to
the respondent.
e) For that the High Court erred in failing to call upon
the petitioner to file its affidavit on merits and to raise its
objection in writing to the executability of the foreign award?
f) For that the High Court erred in holding that the
affidavit disclosing the Bank Accounts filed by the petitioner
in terms of the order dated 18.09.2014 gave a very bleak
picture about the financial condition of the petitioner.
g) For that the High Court failed to appreciate that the
decreeholder/
respondent had not met or satisfied the test
laid down in Sections 47 and 48 of the Arbitration &
Conciliation Act, 1996.
10
h) For that the High Court failed to appreciate the purport
and the scope of the Arbitration & Conciliation Act, 1996
and misdirected itself in law and in fact.
i) For that the High Court failed to appreciate that the
impugned order will cause create hardship and
inconvenience and would affect the daytoday
business of
the petitioner.
j) For that the High Court erred in holding that sufficient
opportunity was given to the petitioner to deal with the
maintainability of the execution proceeding.”
6. The aforementioned special leave petition came to be
dismissed on 27th February, 2015. Similarly, the special leave
petition filed by the petitioner, being SLP(C) No.6682 of 2015
(pertaining to contractII
involving similar questions and
grounds), was dismissed on 17th August, 2015.
7. Later on, when the matter proceeded before the Single
Judge of the High Court in the execution petition, the Court
noted that it had already held in its earlier order dated 4th
December, 2014, that the subject foreign awards were deemed
to be decrees and hence enforceable, whilst rejecting the
objections of the petitioner in both the cases with regard to the
maintainability of the execution petition. The learned Single
Judge directed the petitioner to examine its Principal Officer.
The petitioner preferred an appeal against the said decision
11
dated 17th March, 2015 which came to be disposed of by the
Division Bench vide common order dated 1st December, 2015.
These orders have been allowed to attain finality. The
petitioner then filed a review application in the execution case.
The same was dismissed by the learned Single Judge of the
High Court on 8th June, 2015, holding that the review
application was a ploy to reopen the matter which had
attained finality after the rejection of the special leave
petitions. After the rejection of the review application, the
petitioner was advised to file G.A. Nos.3306/2016 and
3307/2017 in the respective execution cases, purporting to
raise objections regarding the enforceability of the foreign
awards in terms of Section 48 of the Act. We may refer to the
application filed in G.A. No.3306/2016 as to the grounds on
which the objection regarding enforceability of the foreign
awards came to be resurrected. The relevant extract thereof
reads thus:
“74. The said purported award dated April 10, 2013 is not
enforceable, interalia, being vitiated by fraud and/or
corruption as morefully stated above. The particulars of
fraud and corruption are, without prejudice to the order
12
challenges to enforceability of the purported award,
summarized hereinbelow:(
a) The award holder with intent to deceive and/or to
perpetrate fraud on the petitioner actively concealed the
factum of filing the suit being C.S.No.196 of 2011 (Sleepwell
Industries Ltd. Vs. Bank of Baroda) for US$ 382,348.90
before the Arbitral Tribunal and procured the purported
Award including the said sum for, Arbitral Tribunal.
(b) The award holder with an intent to deceive the petitioner,
made a promise without any intention of performing it.
(c) By its letter and mail both dated February 14, 2011 the
award holder accepted that it has sent inferior quality of rice
and promised that it will send its inspectors to Bangladesh
for joint inspection of the inferior quality of rice sent by it
and forwarded the passports of its inspectors for obtaining
VISA and agreed that it will accept 90% payment
provisionally against their export bill of exchange and that
balance 10% will be paid after joint inspection and
settlement of claim towards the inferior goods supplied by
the award holder.
(d) However, as soon as the 90% payment was released by
the petitioner, as agreed between the parties, the award
holder refused to send its representative for joint inspection
and finalization of the claim and allegedly claimed that the
inspection held at loading port was final and with an intent
to deceive and/or to perpetrate fraud on the petitioner
demanded the balance 10% amount of the bill of exchange.
(e) The award holder made a suggestion as to a fact that if
the petitioner accept the Bill of Exchange for the inferior
quality of goods and pays 90% of the bill amount, it will
depute its representatives for joint inspection and the
balance 10% will be settled after such joint inspection and
finalization of the claim, which was not true and which the
award holder did not believe it to be true.
(f) The award holder with an intent to deceive the petitioner
procured the purported award in respect of 2.22% of the
total amount due under the three consignments actively
concealing that it has neither raised any invoice on the
petitioner for all the three consignments nor did it make any
claim under the subsisting Letters of Credit through which
13
the entire payments were made in respect of the first two
consignments and further that it has not raised any Bill of
Exchange for the balance 2.22% in respect of the third
consignment sent through vessel M.V. Tu Man Gang.
(g) The award holder with an intent to perpetrate fraud on
the petitioner gave a wrong email address to GAFTA and
correct email address was given by its mail dated January
11, 2013 and February 12, 2013 after close of arbitration
proceedings by the arbitral tribunal by its mail dated
December 17, 2012.
(h) The award holder with an intent to perpetrate fraud on
the petitioner suggested as a fact, which was not true and
which the award holder did not believe to be true that the
balance 2.22% or US$ 10/per
MT shall be payable on the
basis that “certificate of inspection at the time of loading
shall be final as to quality” by suppressing the addendum to
the contract dated December 7, 2010, which provided that
“the balance amount at the rate of US$ 10/per
MT will be
payable after receipt of quality inspection report at
destination port and in the process, the award holder
procured a purported award for the amount US$
137,148.20.
(i) The award holder with an intent to perpetrate fraud on the
petitioner actively concealed from the arbitral tribunal that
in respect of the third consignment being the consignment
sent through the vessel MV Tu Man Gang, the balance 10%
of their invoice amounting to US$ 382,348.90 was to be
settled after inspection and finalization and by doing so, the
award holder procured a purported award for the sum of
US$ 382,348.90.
(j) The award holder with an intend to deceive the petitioner
and to perpetrate fraud on the petitioner deliberately
suppressed from the purported Arbitral tribunal that the
award holder in its letters dated June 10, 2011 and July 11,
2011 had admitted its liability and agreed to pay demurrage
charges on vessel Tu Man Gang to the extent of US$
20,921,88. The petitioner is unable to disclose other
particulars of fraud till disclosure of fuller and better
particulars by the award holder. The petitioner craves leave
to file a supplementary affidavit upon such disclosure of
fuller and better particulars by the award holder.
14
75. In the premises, the purported award holder was in
conflict with the Public Policy of India as the same was
induced or affected by fraud and hence enforcement of the
purported award holder be refused and/or the same should
be held as unenforceable.
76. Without prejudice to the aforesaid and/or in addition
thereto, the purported award is not enforceable, interalia, on
the following grounds:A1
The contract between the parties dated 25th October
2010 provides as follows:
“All other terms and conditions not in contradiction with the
above as per GAFTA 48 Arbitration as per GAFTA 12 in
London.
ARBITRATION
All disputes in connection with this contract or the execution
thereof shall be settled amicably by friendly negotiations
between the two parties. If no settlement can be reached, the
case in dispute shall then be submitted GAFTA, LONDON for
arbitration as per GAFTA clause for rice and amendment if
any and Arbitration Rule 125”.
A copy of the GAFTA 125 is annexed hereto and marked
“OO”.
A copy of the GAFTA No.48 is annexed hereto and marked
“PP”.
A2.
On a perusal GAFTA No.48, it is apparent that it is a
standard form of contract to be filled up in detail and is to be
signed by the parties. In the instant case, the petitioner did
not sign any contract with the award holder in GAFTA No.48.
In view of the above, there was no contract between the
parties herein in terms of and/or on the basis of GAFTA
Form No.48.
A3
However, the purported award was passed on the basis
of GAFTA No.48. Therefore, the arbitral procedure was not in
accordance with the agreement of the parties and the award
is not enforceable under Section 48 (1)(d) of the said Act.
B1.
Assuming but not admitting that GAFTA No.48 was
applicable, the same could not be applied if in contradiction
15
with the agreement dated October 25, 2010. The agreement
as amended by the Addendum dated December 7, 2010
provided that “….. balance amount of US$10 Per Mt will be
payable after receipt of quality inspection report of
destination port.”
B2.
However, the purported award was passed on the basis
of clause 5 of GAFTA No.48 providing “Certificate of
Inspection at time of loading shall be final as to quality”.
B3.
Therefore, the arbitral procedure was not in accordance
with the agreement of the parties and hence, the said
purported award is not enforceable.
C1.
By a mail dated September 19, 2011, the Award holder
informed the petitioner to appoint its arbitrator within three
days therefrom and informed that on failing to do so, they
will request GAFTA to appoint an Arbitrator on behalf of the
petitioner. However, by a communication dated February 29,
2012 Mr. Bardia on behalf of the award holder informed
GAFTA that he has received a purported letter dated
September 22, 2011 from GAFTA appointing one Mr. R. Eikel
as arbitrator on behalf of the petitioner in case No.14456
and requested to appoint Arbitrator in Case No.14457.
C2.
The time to appoint arbitrator by the petitioner was to
expire on September 22, 2011. Only after that, the award
holder was entitled to make an application to GAFTA to
appoint an Arbitrator. Appointment of Mr. R. Eikel by GAFTA
on September 22, 2011 without any application by the
award holder was irregular and not binding on the
petitioner. In any event and as the award holder by its letter
dated September 19, 2011 wanted the petitioner to appoint
its Arbitrator within 3 days therefrom and as in computing
the 3 days period the date of issuance being September 19,
2011 was to be excluded, no appointment of any Arbitrator,
either of Mr. R. Eikel or otherwise, could not be made by
GAFTA on September 22, 2011 and such alleged
appointment is bad being contrary to the agreement between
the parties and is not and cannot be binding on the
petitioner.
C3.
Since the Arbitrator on behalf of the petitioner was not
appointed in accordance with the procedure agreed, the
composition of the arbitral tribunal was not in accordance
16
with the agreement of the parties and the purported award
cannot be enforced and its enforcement should be refused.
D1.
The purported award provides that –
“6.20 : The Tribunal THEREFORE FINDS THAT Buyers, with
respect to Cl.6.1 of the GAFTA Sampling Rules No.124 were
obliged to provide a certificate of analysis latest 14 days after
that message dated 5 February 2011, therefore, latest 20
February 2011.
6.21: The date of default shall therefore, be one day later, the
21 February, 2011 and SO WE DO FIND”.
D2.
The GAFTA Arbitration Rules provide that a claimant
can give a notice of his intention to refer a dispute to
arbitration within the time limits prescribed therein. In the
case of nonpayment
of amount, a Notice of Reference cannot
be issued beyond 60 days from the date the dispute has
arisen. A claimant can initiate arbitration proceeding or
appoint an Arbitrator before expiry of the time limit.
D3.
The Notice of Arbitration was given and Arbitrator on its
behalf was appointed by the award holder by two letters both
dated July 28, 2011. Therefore, the Notice of Arbitration and
appointment of Arbitrator was ex facie time barred under the
Arbitration Rules of GAFTA and/or Agreement between the
parties.
D4.
Further, GAFTA 124 does not find any place in the
agreement between the parties and is wholly inapplicable in
the instant case.
D5.
Therefore, the arbitral procedure and also appointment
of arbitrators was not in accordance with the agreement of
the parties and also not in accordance with law applicable,
and hence, the said purported Award was not enforceable.
E1
By a mail dated September 19, 2012, the arbitral
tribunal allowed the award holder to file its further claim
submissions till close of business of that date. No
opportunity was given to the petitioner to file its defence
submission. By a mail dated November 23, 2012 GAFTA
requested the award holder as to whether address of the
petitioner submitted by the award holder was correct. By a
mail dated December 17, 2012, the Tribunal closed
arbitration proceedings. By mails dated January 11, 2013
17
and February 12, 2013 the award holder submitted the
correct email address of the petitioner to GAFTA, i.e. after
close of arbitration proceedings.
E2.
Therefore, the petitioner herein was not given proper
notice of the appointment of the arbitrator. The petitioner
was not given proper notice of the arbitral proceedings. The
petitioner was unable to present its case. In the premises,
the purported award is not enforceable.
F1.
From the mail of GAFTA dated September 26, 2012, it is
clear that GAFTA can only accept hardcopies towards
pleadings. From the mail dated September 25, 2012 of
GAFTA, it appears that hardcopy of the claim submission
was filed by the award holder on September 24, 2012,
though the time limit was September 19, 2012.
F2.
In the premises, the arbitral procedure was not in
accordance with the law applicable and enforcement of the
purported award should be refused.
G1.
A Civil suit being C.S. No.185 of 2011 filed by the
petitioner against the award holder challenging the
purported notices both dated July 28, 2011 referring the
alleged disputes to Arbitration and appointment of Arbitrator
is pending disposal. In the said suit an order dated
September 9, 2011 was passed by an Hon’ble Single Judge
directing that any action taken by the parties to the suit
shall be subject to and abide by the result of the suit. The
said order was upheld by the Hon’ble Division Bench
dismissing the CrossObjection
by the Award holder. The
suit is still pending. The award holder did not challenge the
order dated September 28, 2012 passed by a Division Bench
of this Hon’ble Court dismissing both the appeals and the
two cross objections. Having not done so, the award holder
accepted that the observations made by the learned Single
Judge to the effect that “any action taken by the parties to
the suit shall be subjected to and abide by the results of the
suit” would affect the enforcement of any award, which
would be passed by the Arbitral Tribunal.
G2.
In the premises, the purported award did no and could
not attain finality and hence not yet enforceable.”
18
8. The learned Single Judge of the High Court (Executing
Court) was once again called upon to consider the objections
regarding enforceability of the subject foreign awards. At the
outset, it has noted that such a challenge was not
maintainable after the rejection of the objections in the first
round had attained finality with the dismissal of the special
leave petitions by this Court. It held that the objections now
taken would be hit by the principles of res judicata. Despite
that, the Court proceeded to examine the objections on merit
and opined that the same were not falling within the purview
of conflict with the public policy of India as such. On the other
hand, it was an attempt to invite the Court to have a second
look at the foreign awards. That could not be countenanced in
view of the limited jurisdiction under Section 48 of the Act,
considering the decisions cited at the Bar by both sides
highlighting the distinction between the approach to be
adopted while examining the question of enforceability of the
foreign award and the domestic award, as delineated by this
Court in Shri Lal Mahal Ltd. Vs. Progetto Grano SPA1,
1 (2014) 2 SCC 433
19
Renusagar Power Company Ltd. Vs. General Electric Co.2,
and Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes
Ltd.3. In addition, the High Court went on to observe that the
petitioner, having failed to participate in the arbitration
proceedings despite the opportunity given to it and having
notice of such proceedings, could not be heard to make a
grievance that the respondent award
holder did not produce
the relevant documents before the Arbitral Tribunal. On the
other hand, the Court held that the respondent award
holder
had placed all the relevant documents/materials before the
Arbitral Tribunal and more particularly, because the
subsequent correspondence between the parties disclosed very
clearly that the respondent had categorically denied its
obligation to produce any quality inspection report at the Port
of destination. It also noted that the Arbitral Tribunal had
jurisdiction to decide the issue one way or the other and in the
present case, it had so decided. The High Court also noted
that the petitioner had not alleged any fraud or bias against
2 1994 Supp. (1) SCC 644
3 (2003) 5 SCC 705
20
the Arbitral Tribunal as such. From the grievance of the
petitioner, even if taken at its face value, it did not warrant
interference under Section 48 of the Act. In substance, the
learned Single Judge after adverting to the settled legal
position and the factual matrix of the case on hand, concluded
that the objections of the petitioner, regarding enforceability of
the subject foreign award, were devoid of merit and thus
rejected the same.
9. Aggrieved, the petitioner has once again approached this
Court by way of the instant special leave petitions, broadly
reiterating the objections taken before the High Court. In that,
the subject foreign awards are vitiated by fraud; the awards
are contrary to the terms of the contract and thus violative of
Section 28(3) of the Act; the Arbitral Tribunal has considered
an issue in respect of which there is no preexisting
dispute;
the Arbitral Tribunal has made out a new case which was not
even made out by the claimant in the statement of claim; the
subject foreign awards are not supported by reason and are in
violation of natural justice and in contravention of the
21
fundamental policy of Indian law; and the Executing Court
considering the application under Section 48 of the Act has
acted as a First Court of appeal and assumed powers under
Order 41 Rule 33 of CPC and sustained the arbitral award by
supplying new reasons and facts, which is not the basis on
which the impugned awards have been passed.
10. The respondent, on the other hand, has urged that the
application filed by the petitioner was not maintainable as it
was hit by the principles of res judicata, issue estoppel and
cause of action estoppel and principles analogous thereto. The
respondent has also invited our attention to the conduct of the
petitioner which was indicative of an attempt to overreach the
Court. In that, after the interim order was passed by the
Court on 20th October, 2018, permitting the respondent to
withdraw part of the amount deposited in the High Court in
relation to the execution of the subject foreign awards, the
petitioner changed its name on 23rd April, 2018 from LMJ
International Ltd. to Sri Munisuvrata Agri International
Limited. It then changed its registered office from Hemanta
22
Basu Sarani to British India Street on or about 26th April,
2018. The petitioner then, without any compunction,
proceeded to file a petition under Section 10 of the Insolvency
and Bankruptcy Code, 2016 before NCLT, Kolkata on 27th
April, 2018 so as to invoke a moratorium against the release of
any further amount to the respondent, in the event the
respondent succeeded in the present petitions. The purpose
for which the petitioner invoked NCLT proceedings is, in fact,
manifest from the averments in the petition filed by the
petitioner before the NCLT itself, claiming that the objective of
initiating the corporate insolvency process was to prevent the
respondents from receiving the proceeds. All these
developments have been brought on record by the respondent.
The same were not disclosed by the petitioner on its own,
which it was obliged to do in law. For this reason alone,
contends the respondent, no indulgence should be shown to
the petitioner.
11. On merits, it is submitted that the grounds urged by the
petitioner would not come within the purview of Section 48 of
23
the Act, which is very narrow and does not require the Court
to have a second look at foreign awards. The grounds, at best,
could be urged by the petitioner in the appeal to be filed
against the foreign award governed by English Laws (UK
Arbitration Act, 1996). The petitioner has allowed the said
awards to attain finality having failed to file such appeal. Even
the argument of fraud on the basis of the allegation that the
relevant documents were not brought to the notice of the
Arbitral Tribunal by the respondent – award holder, is
baseless and only a subterfuge for protracting the recovery of
dues. In that, the respondent had produced a swift message
dated 3rd June, 2011 sent from the respondent bank to the
petitioner bank and the subsequent correspondence between
the parties to which reference has been made by the Arbitral
Tribunal while deciding the matter. There is no allegation that
the respondent concealed the stated correspondence between
the parties with a view to obtain an arbitral award through
fraud. The specific ground taken by the petitioner was that the
award holder, with intent to deceive, perpetuated fraud on the
24
petitioner. That is not enough to hold that the subject foreign
awards were unenforceable within the meaning of Section 48
of the Act. The petitioner had sufficient notice of the
arbitration proceedings but it chose not to participate in the
said proceeding for reasons best known to it. Therefore, now it
cannot turn around and make a grievance about nonconsideration
of any document. More so, the grievance is in
the nature of inviting the Executing Court to have a second
look at the award which is not the scope of Section 48 of the
Act. The respondent has also refuted the ground urged on
behalf of the petitioner regarding awarding of compound
interest at the rate of 4% per annum calculated at quarterly
rests, being in conformity with the governing laws. The
respondent has also relied on the dictum in Shri Lal Mahal
Ltd. (supra) and Renusagar Power Company Ltd., (supra).
The respondent has also distinguished the judgments cited by
the petitioner on the scope of interference in domestic awards
on the ground of its enforceability as opposed to the foreign
awards in the present cases. The respondent submits that
25
these petitions be dismissed with exemplary costs and while
doing so, appropriate directions be issued to the Registrar
(OS), High Court at Calcutta to forthwith encash the FDs of
approximately Rs.2 crores, in the credit of both the execution
cases and forthwith remit the entire receipts, including the
accrued interest in US Dollars, to the respondent, as was
ordered earlier vide orders dated 5th January, 2018, 5th March,
2018 and 20th April, 2018, respectively, after obtaining prior
permission of the Reserve Bank of India in that regard. The
respondent also seeks direction against the petitioner for
securing the deficit amount, which would remain after
appropriation of the amount under the FDs, lying with the
Registrar (OS), Calcutta High Court. The respondent would
contend that such direction is necessary in the peculiar facts
of the present case and to obviate any complication due to
moratorium, as the petitioner has invoked proceedings under
the Insolvency and Bankruptcy Code.
26
12. We have heard Mr. A.K. Sinha, learned senior counsel
appearing for the petitioner and Mr. Shyam Divan, learned
senior counsel appearing for the respondents.
13. We first proceed to examine the preliminary issue as to
whether it was open to the petitioner to raise grounds
regarding enforceability of the foreign awards despite the
judgment of the High Court dated 4th December, 2014,
rejecting the objections in the context of maintainability of the
execution petition and which decision had attained finality
consequent to rejection of the special leave petitions by this
Court and including the review petition by the High Court. The
petitioner contends that on the earlier occasion, the objections
were limited to the questions of maintainability of the
execution case on grounds as were urged at the relevant time
and not in reference to the enforceability of the subject foreign
awards as such. This argument, to say the least, is an attempt
to indulge in hairsplitting
and nothing more. It is an
argument in desperation only to protract the execution of the
foreign award on untenable grounds. Indeed, the petitioner
27
had not filed any formal application to raise the issue of
maintainability of the execution case but the Court had
permitted the petitioner to orally urge “all available grounds”.
The learned Judge had then reproduced the five points, which
alone were orally urged on behalf of the petitioner through its
counsel, as extracted in paragraph 4 above. The High Court
examined the said grounds which, obviously, were
transcending in the realm of enforceability of the subject
foreign awards. In the special leave petitions filed before this
Court, the petitioner had articulated questions of law and the
grounds also in reference to the scope of Section 48 of the Act
which included the enforceability of the subject foreign
awards. That can be discerned from the close reading of
Questions and Grounds in the previous SLPs, reproduced in
paragraph 5 above. Additionally, the learned Single Judge of
the High Court vide order date 17th March, 2015 had made it
amply clear that the subject foreign awards were deemed to be
decrees, which presupposes that the same were enforceable.
That order came to be upheld by the Division Bench whilst
28
disposing of the appeals preferred by the petitioner. These
orders have become final and have not been challenged by the
petitioner. The petitioner thereafter unsuccessfully resorted to
the remedy of review before the High Court. Even the order
passed in review petition has become final.
14. Be that as it may, the grounds urged by the petitioner in
the earlier round regarding the maintainability of the
execution case could not have been considered in isolation
and de hors the issue of enforceability of the subject foreign
awards. For, the same was intrinsically linked to the question
of enforceability of the subject foreign awards. In any case, all
contentions available to the petitioner in that regard could and
ought to have been raised specifically and, if raised, could
have been examined by the Court at that stage itself. We are of
the considered opinion that the scheme of Section 48 of the
Act does not envisage piecemeal consideration of the issue of
maintainability of the execution case concerning the foreign
awards, in the first place; and then the issue of enforceability
thereof. Whereas, keeping in mind the legislative intent of
speedy disposal of arbitration proceedings and limited
interference by the courts, the Court is expected to consider
both these aspects simultaneously at the threshold. Taking
any other view would result in encouraging successive and
multiple round of proceedings for the execution of foreign
awards. We cannot countenance such a situation keeping in
mind the avowed object of the Arbitration and Conciliation Act,
1996, in particular, while dealing with the enforcement of
foreign awards. For, the scope of interference has been
consciously constricted by the legislature in relation to the
execution of foreign awards. Therefore, the subject application
filed by the petitioner deserves to be rejected, being barred by
constructive res judicata, as has been justly observed by the
High Court in the impugned judgment.
15. There is an additional reason which dissuades us to
show any indulgence to the petitioner. We find force in the
grievance made by the respondent that the conduct of the
petitioner is indicative of an attempt to overreach this Court.
For, after an interim order was passed in favour of the
30
respondent, permitting withdrawal of part of the deposited
amount, the petitioner lost no time in changing the name of
the company within three days thereafter on 23rd April, 2018.
The petitioner also changed its registered office address on 26th
April, 2018 and had no compunction in moving the NCLT,
Kolkata on 27th April, 2018 to prevent the respondent from
enjoying the fruits of the subject awards, and saying so
brazenly in the petition filed by it under Section 10 of the I & B
Code. Strikingly, attention of this Court was invited to these
facts by the respondent by moving a formal application. The
petitioner has not offered any explanation, much less a
plausible one. On this count also, the special leave petitions
deserve to be rejected.
16. Having said this, we do not wish to examine any other
argument of the petitioner, including on merits of the
enforceability of the subject foreign awards. Even if we were to
do so, we would have agreed with the High Court that the
grounds urged by the petitioner to question the enforceability
31
of the subject foreign awards are untenable, not being within
the purview of Section 48 of the Act. Be that as it may, we find
that the High Court has considered every aspect of the
grounds urged by the petitioner; and the view so expressed by
the High Court in reference to each of the points considered by
it is a possible view. The High Court has correctly noted the
limited scope for interference in the matter of foreign awards
under Section 48 of the Act, keeping in view the principles
enunciated by this Court. The High Court has justly noted
that the attempt of the petitioner was to call upon the
executing court to have a relook
at the award. That cannot be
countenanced. We would also agree with the High Court that
all the relevant documents submitted to buttress the claim of
the respondent before the Arbitral Tribunal, have been
adverted to in the award and the findings reached in the
award are based on the interpretation and meaning given to
the said documents. That can be discerned from the
discussion and findings recorded by the Arbitral Tribunal in
32
the award under consideration. The relevant extract thereof
reads thus:
“6. DISCUSSION AND FINDINGS
6.1 The disputed issues submitted for our determination
concern three different aspects first of all, the question
whether the contractual quality had been delivered by sellers
and received by Buyers. Secondly, the matter of the balance
to the full contractual quantity and thirdly, and
subsequently to the first two issues, the payment of the
invoices.
6.2 As respondents elected not to participate in the round of
submissions the Tribunal is bound to base its discussion
and subsequently its findings on the submission and
evidence filed by claimants only.
6.3 As a starting point on the first issue, whether the
contractual quality had been delivered by sellers and
received by buyers, the tribunal focuses on the provisions of
the governing contract and, as far as relevant, to its
amendments.
6.4 The contract agreed between the parties was for the sale and
purchase of 15000 metric tons of Thai Nonbasmati
Parboiled Rice on FOB Bangkok terms.
6.5. The contract provided in his context under the quality
clause that:“
Rice to be supplied ‘Rice to be supplied shall be 15000MT (5
percent more or less) of Nonbasmati
Parboiled rice 15
percent (Maximum) Broken. Latest Clop of 20092010
Thailand origin In good condition, ‘fit for human
consumption without any unpleasant odour, free from any
sign or mould, fermentation or deterioration and free from
obnoxious and deleterious matters and poisonous weed
33
seeds. Rice must be free from insect infestation and shall
have the following specification”.
i) Moisture (Maximum): 13 PCT
ii) Broken Grains (Maximum): 15 PCT (Rice size of 3/4th and
below will be considered as broken and less than 1/4th
Broken should not be more than 2 percent
iii) Foreign Mater (Maximum) : 0.3 Percent
iv) Dead, Damaged and Discoloured Grains
(Maximum): 3 Percent in Total
iv) Radio Activity (Maximum) : 50 DO/KG 01 737 SC/134 CS
(Relaxable for the Crop of SAARC and SouthEast
Asian
Country)
6.6 In relevance to this dispute and under consideration of the
Quality Clause of the Contract, same was amended on 7th
December 2010 and altered:
“2. Specifications: Clause II – to be amended to 17 Pct Max
I/0 15 Pct. Clause IV – to be amended to 6 Pct. Max I/0 3
Pct in Total.
All other specifications will be remain unchanged.”
6.7 Three partial shipment had been performed by claimants as
follows:1.
1,610.00 mt on board of MV Sturdy Falcon on 27th
December 2010
2. 3,430.00 mt on board of MV Genius Mariner on 31st
December 2010
3. 8,689.55 mt on board of MV Tuman Gang (sic) on 17th
January 2011
6.8 Subsequently, 133,729.55 metric tons had been delivered by
Sellers to Buyers and Sellers provided for each shipment
various documents under the Contract, including socalled
“preshipment
Inspection Certificates issued by SGS” as
under the Payment Clause, yet altered by Amendment to the
Contract dated 7 December 2010 to same issued now by
“ISC”.
34
6.9 Those preShipment
inspection Certificates were indeed
Issued by ISC for all three shipments displaying the following
analysis results:
1. Certificate No.11000(2) 22010/4 dated 27th December
2010 for MV Sturdy Falcon
Mositure: 12.80%
Total broken Kernels: 15.00%
Small Broken: 0.59%
Dead, damaged and discoloured kernels: 3.00%
Foreign Matter. 0.07%
2. Certificate No.11038/2010/4 dated 31st December
2010 for MV Genius Manner
Mositure: 12.80%
Total broken Kernels: 12.60%
Small Broken: 0.46%
Dead, damaged and discoloured kernels: 3.00%
Foreign Matter. 0.16%
3. Certificate No.11039/2010/2 dated 17th January 2011
for MV Tu Man Gang
Mositure: 12.80%
Total broken Kernels: 14.79%
Small Broken: 0.23%
Dead, damaged and discoloured kernels: 3.00%
Foreign Matter. 0.29%
6.10 If we disregard the alterations envisaged by the Amendment
to the Contract dated 7th December 2010, granting an even
higher level for “Broken Grains” end “Dead, damaged and
Discoloured Grains”, the results provided by ISC were well
Within the parameters foreseen for the quality under the
Contract.
6.11 The Tribunal therefore FINDS THAT the quality of the cargo
shipped on the three vessels was within the amended
contractual specifications.
6.12. In addition to the above, the provision DI the Quality Clause
5 of GAFTA Contract No.48, being Tale Quale contract as
such, states, Inter alia:
35
“Certificate of Inspection at time o/ loading –shall be final
as to quality”.
6.13 Consequently, and under consideration of the Payment
Term of theContract
providing for payment
“on receipt 01 the shipping documents’, inter alia the above
PreShipment
Certificates as issued by ISC and provided by
Sellers, Sellers were duty entitled to trigger payment under
the Contract.
6.14 WE THEREFORE FIND THAT Sellers’ claim for payment of
IJSD 440.00 per metric ton all three partial shipments
succeeds.
6.15 In reference with the balance of USD 10.00 per metric ton for
each partial shipment, as agreed under the Amendment
dated 7th December 2010, the Amendment Provided that the
“Balance amount@ US$10.00 per MT will be payable after
receipt of quality inspection report of destination port”.
6.16 This indeed establishes an alteration to the original
provision of the Contract that the quality would be final at
the port of loading, at least as far as the balance of USD
10.00 per metric ton is concerned. On interpretation and
construction of the Contract itself and its Amendment dated
7th December 2010, the Tribunal notes that the Amendment
itself defines in
“1. Quantity” that the weight in accordance with the
Contract would be still “final at loading” while the amended
payment term now states that “a balance amount of US$
10.00 per MT would only “be payable after receipt of a
quality inspection report of destination port.”
6.17 WE THEREFORE FIND THAT the Contract had been validly
altered to the provision that Sellers could only have triggered
payment of the balance of USD 10.00 per metric ton after
presentation of a quality inspection report from the port of
destination, i.e. Bangladesh.
6.18 As no such quality Inspection had been presented by
Buyers, despite various reminders from Sellers, until the
present day, the GAFTA Sampling Rules No.124, cl. 6:1
provide that a “certificate of analysis should be sent to the
other party “within 14 consecutive days” after dispatch of the
samples to the analyst.
36
6.19 Buyers in their message of 5th February 2011 firstly
explained that the quality of the cargo on the last vessel i.e.
MV Tu man Gang, was inferior.
6.20 The Tribunal Therefore finds that buyers, with respect
Tribunal THEREFORE FINDS THAT with respect to cl. 6:1 of
the GAFTA Sampling Rules No.124 were obliged to provide a
certificate of analysis Latter that message dated 5th February
201 1 therefore latest 20th February 2011.
6.21. The date of default shall therefore be one day later, the 21st
February 2011 and SO WE DO FIND.
6.22 As Buyers failed to forward the certificate within this limit of
14 days, any claim for rejection or for an allowance in
respect of any matters dealt with under the Contract, and its
Amendments. shall be deemed to be waived and absolutely
barred, AND SO WE DO FIND.
6.23 THE TRIBUNAL THEREFORE FINDS THAT Sellers’ claim for
payment of balance invoices of USD 10,00 per metric ton
succeeds.
6.24 There is no apparent disputes as far as the quantity of the
shipment under the contract is concerned as the contract
provided for the shipment of 15000 metric tons, +5%
in
buyers option and sellers only shipped 13,729.55 metric
tons.
6.25 Buyers nevertheless informed Sellers 5th February 2011 that
the original Letter of Credit as foreseen for payment under
the Contract not be extended and Buyers therefore planned
to “establish Fresh LC for the balance quantity of 2000 ton
in the old contract”.
6.26 The Tribunal has not seen any new letter of credit for this
purpose and as Buyers have not filed such, the Contract
came to its end,
6.27 WE THEREFORE FIND THAT Sellers’ calculations for sums
and interest due should be based on a quantity of 13,729.55
metric tons.
6.28 WE FIND AND DECLARE THAT:
37
1) Sellers’ claim for payment of balance of USD 10.00 per
metric ton for each of the three shipments amounting to
USD 137,148.20 succeeds. Interest to run from 29th June
2011. The date of Buyers’ email stating that they would not
be “obliged and/or liable to pay any sum” to Sellers.
2) Sellers’ claim for the balance of as deducted from the
invoice in reference to the shipment on board of MV Tuman
Gang amounting to USD 382,348.90 succeeds. Interest to
run from 20th February 2011, the date by which Buyers
should have provided a ‘quality inspection report at
destination port’.
Buyers shall pay compound interest on the above sum of
USD 137,148.20 at the rate of 4% (four per cent) per annum
calculated at quarterly rests, from 29th June 2011 to the date
of payment.
7.2 Buyers shall forthwith pay to Sellers USD 382,348.90 (three
hundred & eightytwo
thousand, three hundred and forty
eight United States dollars and ninety cents).
Buyers, shall forthwith pay to sellers USD 332,348.90 at the
rate of 4% (four percent) per annum calculated at quarterly
rests, from 20th February 2011 to the date of payment.
7.3 WE THEREFORE AWARD THAT Buyers shall pay the fees,
costs and expenses of this arbitration as per the attached
schedule.”
17. Suffice it to observe that the Arbitral Tribunal has
considered all aspects of the matter and even if it has
committed any error, the same could, at best, be a matter for
correction by way of appeal to be resorted to on grounds as
may be permissible under the English Law, by which the
subject arbitration proceedings are governed. We may not be
38
understood to have expressed any opinion on the correctness
of those issues.
18. In view of the above, these special leave petitions are
dismissed with exemplary costs, quantified at an aggregate
amount of Rs.20,00,000/(
Rupees Twenty Lakh only). The
amount towards costs be paid to the respondent within six
weeks from today.
19. Although we are dismissing the special leave petitions,
we accede to the request of the respondent to pass a specific
order to direct the Registrar (OS), Calcutta High Court to
forthwith encash the FDs lying deposited in the credit of the
concerned stated execution case and, after obtaining the
Reserve Bank of India’s permission forthwith, remit the entire
amount, including the interest accrued in US Dollars, to the
respondent. That shall be done within eight weeks from today
and compliance report be submitted in the Registry of this
Court within two weeks thereafter. We further clarify that the
above directions shall be complied with by the Registrar (OS),
Calcutta High Court, irrespective of any order passed by any
39
other Court/Tribunal in India. We are required to pass such a
directions in the peculiar facts of the present case.
…………………………..….J.
(A.M. Khanwilkar)
…………………………..….J.
(Ajay Rastogi)
New Delhi;
February 20, 2019.
No comments:
Post a Comment