On 2nd June 2020, The Supreme Court of India in the case of M/S. CENTROTRADE MINERALS AND METALS INC. v. HINDUSTAN COPPER LTD. The bench comprising of Justice R.F. Nariman, Justice S. Ravindra Bhat and Justice V. RAMASUBRAMANIAN held that in case of a two-tier arbitration agreement, the Foreign Arbitral Award can be executed.
Facts
U.S. Corporation entered into a contract for the sale of 15,500 DMT of copper concentrate to be delivered at the Kandla Port in the State of Gujarat, the said goods to be used at the Khetri Plant of the respondent Hindustan Copper Ltd. Dispute the said goods to be used at the Khetri Plant of the respondent Hindustan Copper Ltd.
The agreement contained a two-tier arbitration agreement by which the first tier was to be settled by arbitration in India. If either party disagrees with the result, that party will have the right to appeal to a second arbitration to be held by the ICC in London. The appellant invoked the arbitration clause. By an award by the arbitrator appointed by the Indian Council of Arbitration made a Nil Award. Thereupon, Centrotrade invoked the second part of the arbitration agreement, as a result of which Jeremy Cook QC, appointed by the ICC, delivered an award in London.
Suit by HCL
HCL, during the pendency of the proceedings before the arbitrator in London, filed a suit in the Court at Khetri, in the State of Rajasthan, challenging the arbitration clause.
In a revision petition filed against the Order of the Khetri Court, the High Court at Rajasthan restrained the appellant from taking further steps in the London arbitration, pending hearing and disposal of the revision petition. This ad interim ex parte stay granted by the High Court was ultimately vacated by the Supreme Court. Meanwhile, the learned arbitrator referred the matter of stay of the parties from proceeding with the London arbitration to the ICC Court, which then decided that the arbitrator could continue with the arbitral proceedings.
Calcutta HC
When the said award by the arbitrator was sought to be enforced by Centrotrade in India, a learned Single Judge of the Calcutta High Court, after considering the objections of HCL, dismissed the Section 48 petition filed by HCL, as a result of which the aforesaid foreign award became executable in India. However, a Division Bench of the Calcutta High Court, by its judgment, held that an appeal would be maintainable inasmuch as the London award could not be said to be a foreign award, but that a two-tier arbitration clause would be valid. However, since the Indian award and the London Award, being arbitration awards by arbitrators who had concurrent jurisdiction, were mutually destructive of each other, neither could be enforced, as a result of which the appeal was allowed and the judgment of the learned single Judge was set aside.
Supreme Court
Two separate judgments were delivered by S.B. Sinha, J. and Tarun Chatterjee, J. reported
Ist Judgment
Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245
S.B. Sinha, J. held that a two-tier clause of the kind contained in clause 14 of this agreement is non-est in the eye of law and would be invalid under Section 23 of the Indian Contract Act. In this view of the matter, the foreign award could not be enforced in India, and Centrotrade’s appeal was therefore dismissed, the appeal filed by HCL being allowed.
These questions were answered by stating that the two-tier arbitration process was valid and permissible in Indian law; that the ICC arbitrator sat in an appeal against the award of the Indian arbitrator; that the ICC award was a foreign award; but that since HCL was not given a proper opportunity to present its case before the ICC arbitrator, Centrotrade’s appeal would have to be dismissed and HCL’s appeal allowed.
IInd Judgment
The matter then came on a reference before a 3-Judge Bench of this Court and is reported in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. (2017) 2 SCC 228
Two questions were raised before the Supreme Court and Supreme Court addressed only the first question and depending upon the answer, the appeals would be set down for hearing on the remaining issue. And further, the court answered the first question in an affirmative way and stated that the appeals should be listed again for consideration of the second question which relates to the enforcement of the appellate award.”
This is how the appeals have been listed again for consideration of the second question, which relates to enforcement of the London award.
Final decision of the Court
The Supreme Court of India held
- That respondent did not participate in the arbitral proceedings, even though invited to do so.
- Having noticed that the respondent wanted to stall the arbitral proceedings by approaching the Courts in Rajasthan and having succeeded partially. The arbitrator took this into account and then passed his award. This being the case, on facts we can find no fault whatsoever with the conduct of the arbitral proceedings.
- That the arbitrator cannot be faulted on this ground, the arbitrator is in control of the arbitral proceedings and procedural orders which give time limits must be strictly adhered to.
- That the learned arbitrator should have excused further delay and should not have acted on frivolous technicalities.
- HCL chose not to appear before the arbitrator and thereafter chose to submit documents and legal submissions outside the timelines granted by the arbitrator.
- Even otherwise, remanding the matter to the ICC arbitrator to pass a fresh award in, is clearly outside the jurisdiction of an enforcing court under Section 48 of the 1996 Act.
The Court further stated that the foreign award shall now be enforced.
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