Force Shipping Limited vs Ashapura Minechem Limited, A ...
2003 Latest Caselaw 346 Bom

JUDGMENT

F.I. Rebello, J.

1. Petitioners by the present application have sought enforcement of the foreign Award dated 16.10.2001 and 11.6.2002. The Respondents have put in appearance and have opposed enforcement principally on two grounds.

It is firstly contended that the agreement between the parties only provides that the place of arbitration will be London. The clause does not set out the law to be followed by the Arbitral Tribunal. Considering this to be a foreign Award and in the light of the judgment of the Apex Court in Bhatia International v. Bulk Trading S.A. and Anr. , the challenge to the Award would have to be under Section 34 of the Act of 1996 and consequently the application as filed is not maintainable. It is secondly contended that it is fundamental policy of Indian Law that the Awards has to be reasoned. In the instant case, though the arbitrator has given reasons, yet at the same time, it is set out that the reasons do not form part of the award and the reasons should not be used. It is therefore, contended that this would be violation of public policy considering both the fundamental policy of law and violation of principal of natural justice and fair play by which the court is precluded from examining the reasons.

2. At the hearing of the petition, the learned counsel for the parties have relied on judgments which will be adverted to, to the extent they are necessary in the course of the Judgment. In the first instance, it will be necessary to consider the judgment of the Apex Court in Bhatia International (Supra) to find out whether it supports the contention as canvassed before this court by the learned counsel for the respondent. At the stage of admission there was another petition also before this court wherein a foreign award had been challenged under Section 34 of the Arbitration & Conciliation Act, 1996 relying on the judgment in Bhatia International (Supra). It was in that context and as it was contended that the judgment in Bhatia requires consideration that this petition as well as other petitions were admitted. To my mind after hearing learned counsel for the parties and after examining the ratio decedendi of the judgment in Bhatia International (supra), it is not possible to accept the contention advanced on behalf of the Respondents that Section 34 would be attracted to challenge a foreign award before this court. For that purpose, it will be necessary to reproduce the following portion of the judgment in Bhatia International (supra) which will shed light on the matter:

"The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repealed in all chapters or parts. The general provisions will apply to all chapters or parts unless the statute expressly states they are not to apply or where in respect of a matter, there is a separate provisions in a separate chapter or part. Part II deals with enforcement of foreign award...... Part II then contains provisions for enforcement of "foreign awards" which necessarily would be different. For that reason, special provisions for enforcement of foreign awards are made in part II. To the extent that part II provides a separate definition for enforcement of foreign awards, the provisions in part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded, the provisions of part I will also apply to "foreign awards". (Underline supplied).

From the portion reproduced above, it is clear that the law on the subject may be summarized thus:

(a) When there are general provisions under the statute unless statute expressly states that they are not to apply then in that event, the general provisions would apply.

(b) When the statute provides special provisions for enforcement it is the special provisions which would apply and not the general provisions.

In the instant case there are special provisions for enforcement of foreign awards. Once therefore, there are special provisions for enforcement of foreign Awards then the general provisions including provisions for challenge to the award considering the special provisions would be excluded. That would mean application of Part II, once that be so, Part I would not apply. Under Part I a decree can be executed only if the challenge under Section 34 fails if made. Under Section 48, the foreign awards become enforceable and is to be executed as a decree.

(c) On the consideration of the law set out in Paragraph 28 in so far as application of Section 9 is concerned, it holds that Section 9 would not apply in so far as foreign awards are concerned after the award is made.

From the Judgment in Bhatia, therefore, these are three major propositions which can be culled out. Once that be the case, the first contention advanced on behalf of the Respondent opposing enforcement of the foreign award must be rejected.

3. We then come to the second contention of no reasons or when after giving reasons the order of the arbitral tribunal that the reasons should not be looked into amounts to violation of public policy of India and consequently award shall not be enforced. To examine this contention, it will be first necessary to consider clauses in the agreement itself. Clause 23 may now be reproduced as that is the essential claus in which there is provision provided whether the reasons ought to be given or not and some other situations. The clause reads as under:

"23.(a) If before the Award is made one or more parties to the reference shall give notice to the tribunal that a reasoned award is required, the award shall contain the reasons for the award.

(b) The parties agree to dispense with reasons in all cases where no notice shall have been given to the tribunal under paragraph (a) before the award is made. (Note: the effect of such agreement is to exclude the court's jurisdiction under Section 69 of the Act to determine an appeal on a question of law arising out of the award; see Section 69(1).

(c) Where in accordance with paragraph (b) the parities have agreed to dispense with reasons the tribunal will issue an award without reasons together with a document which does not form part of the award but which gives, on a confidential basis, an outline of the reasons for the tribunal's decision (hereafter called "privileged reasons")

(d) Unless the court shall otherwise determine, the document containing privileged reasons (referred to in paragraph (c) may not be relied upon or referred to by either party in any proceedings relating to the award.

An examination will disclose that it is only if the parties to the reference give notice to the arbitral tribunal that the reasoned award is required then only shall the award contain reasons.

If no notice is given to the Tribunal by any of the parties, then the need to give reasons is dispensed with. Thirdly where the parties have agreed to dispense with the reasons, the tribunal will issue award without reasons together with document which does not form part of the award but on a confidential basis gives an outline of the reasons. Fourthly the document containing reasons may not be relied upon or referred to by either party in proceedings relating to the Award unless the court shall otherwise determine.

Under Section 31(3) of the Act of 1996 the arbitral tribunal shall state reasons upon which it is based unless the parties have agreed that no reasons are to be given or that the award is an arbitral award on agreed terms under Section 30. Perusal therefore would by itself indicate that it is not fundamental policy of law that in arbitral proceedings the award must contain reasons. Parties by agreement can exclude giving of reasons. We have adverted to the clause in the agreement between the parties which contemplates that if any of the parties do not give notice to the tribunal, then tribunal is not bound to give reasons. Even if, therefore, Section 31 is considered, the award would be within requirement of law. Giving of reasons therefore, cannot be said to be a fundamental policy of Indian Law in so far as arbitral proceedings are concerned, as by statute the requirement to give reasons is not mandatory in so far as domestic award is concerned. The Statute itself dispenses with the requirement to give reasons if parties agree that reasons need not be given.

We may now consider whether an award which contains reasons which are not to be relied upon by a court considering enforcement of a foreign award can be said to be in conflict with public policy of India. What is public policy under the foreign awards (Recognition and requirements) Act, 1961, is set out in the judgment of the Apex Court in Renusagar Power Co. Ltd. v. General Electric Company, . The Apex Court observed that public policy under Section 7(1)(2) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy as applied in the field of private international law. Applying the said criteria it held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian Law; or (ii) the interests of India; or (iii) Justice or morality. In the earlier part of the judgment, the Apex Court had observed as under:

"This raises a question whether ..... concept of policy as applicable in the field of public International law should be applied or ..... public policy as applicable in the field of municipal law."

This view of the Apex Court was once again reiterated in Smita Construction Ltd. v. Euro Alloys Ltd. of the Judgment which is reproduced hereunder:

"Therefore, we will proceed on the basis that the expression "public policy" means public policy of India and the recognition and enforcement of foreign award cannot be questioned on the ground that it is contrary to the foreign country public policy and this expression has been used in a narrow sense must necessarily be constructed as applied in private international law which means that a foreign award cannot be recognized or enforce if it is contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality."

The language in so far as Act of 1996 is concerned, for enforcement of foreign award is same or similar to the language used in the Foreign Awards (Recognition and Enforcement) Act, 1961. There is, therefore, no reason to take a view different in the matter of public policy in the enforcement of foreign awards than the view taken by the Apex Court in Renusagar (supra) and reiterated in Smita Conductors Ltd. (supra).

4. With the above, let us examine whether the grounds raised would amount to violation of fundamental policy of Indian Law. Admittedly the ground would not fall under the heading interest of India or justice or morality. The Act of 1996 itself as we have considered does not require even in cases of a domestic award to state reasons. That by consent of parties can be waived. Once the requirement of giving reasons itself can be waived, it cannot be waived, it cannot be said that the giving of reasons would be a fundamental policy of Indian Law considering the statutory provisions. Once reasons can be dispensed with and that mere fact that Arbitral Tribunal may briefly in terms of the contract is required to give reasons which parties cannot rely upon because a clause in the contract so prohibits or the arbitral procedure, it cannot be said to be violation of fundamental policy of Indian Law. At the highest if the Award was challenged in the country where the award was made, it will be open to the court of that country to examine reasons if so required. Fundamental policy of India law however is that foreign awards passed in convention countries, whether New York or Geneva would be recognized and enforced if they are not contrary to fundamental policy of Indian law; interest of India and justice morality. The courts in India while enforcing an award will also not examine illegalities, if any as such illegalities, procedural or substantive could have been considered in the challenge to the Award in the country where it was made. It was argued that the contract does not provide as what would be the law to be applied by the Tribunal. Firstly it was for the Arbitrator to decide what was the law. The Respondent however, at least it is not pointed out had contended before the Tribunal that the law applicable would not be the law being followed by the Tribunal. In the absence of contending as to what would be the law, as the Tribunal was sitting in London what the law would be of that country.

In the instant case, term of the contract itself provided the manner in which the award was to be passed. None of the parties gave notice to the Tribunal that the reasons be given. In these circumstances, second challenge to the enforcement must also be rejected.

5. In the light of that, petition made absolute. The learned counsel for the Petitioner had also drawn my attention to the judgment of the Apex Court in the case of Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. . In that case one of the contention raised was that the court could not have permitted conversion of the application for execution of the decree into one for enforcement of award. The Apex court refused to interfere. It also considered the procedural aspect of enforcement of foreign award and observed that once the court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again.

6. Those observations cannot mean that the Apex Court has bypassed altogether the provisions of Order 21 of Code of Civil Procedure. Under Section 49 where the courts hold that the award is enforceable, then it is deemed to be decree of that court. The decree of that court under Municipal law can only be executed in terms of Order 21 of C.P.C. There is no other mechanism for courts in India to enforce a decree. A party seeking enforcement must call on the court to seek enforcement by one of the methods as provided under Order 21. If the property attached and sold is not sufficient to satisfy the award and there is property of the respondent in some other jurisdiction, the procedure at least within the territorial limits of India would be to transfer the decree. We have framed the rules pursuant to the coming into force of the Arbitration and Conciliation Act, 196 being Rule 803(g) to 803(k). Rule 803(k) sets out that execution application should be presented to the court within whose jurisdiction the person ordinarily resides or property against whom execution is sought is situated. Under Section 47 it contemplates applying for enforcement of foreign award and satisfying mandate of Section 47. Therefore on a harmonious consideration and to enable to give effect to the judgment of the Apex Court in M/s. Fuerst Day Lawson Ltd. (supra) all that can be said is that along with application for enforcement a party seeking enforcement may also apply for execution in the form prescribed so that once the court proceeds to hold that the Award is enforceable, it can thereafter proceed to execute the decree without further procedural requirements. In the instant case, as the Petitioners have not applied for execution, it is open to them to move for execution of the Award. In the light of that:

(1) Enforcement of the foreign Award is allowed.

(2) As the Award is now decree of this court, Petitioners are permitted to take steps to get the award executed as a decree of this court.

Petition stands disposed of accordingly.

No order as to costs.

Petitioners are permitted to enforce the decree in terms of certificate issued by the R.B.I. certifying the exact value of the dollars as of today. C.C. expedited.

The learned counsel for the Respondents seeks stay of the order. Application for stay rejected.

P.A. to issue authenticated copy of this order.