Alcatel India Limited And Anr. vs Koshika Telecom Limited And Ors.
2004 Latest Caselaw 849 Del

JUDGMENT

R.C. Jain, J.

1. The above named petitioners have filed the present application for enforcement of foreign award (award of the London Court of International Arbitration No. 1291) dated 28.5.2003 under Part-II Chapter-I of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') and for execution thereof.

2. The relevant facts leading to the filing of the present application, in brief, are that petitioner No. 1 Alcatel India Limited had supplied to respondent No. 1 Koshika Telecom Limited, telecom equipments for a contract price of Rs. 207.80 crores pursuant to certain agreements entered in 1996. It is alleged that in breach of the contract, Koshika did not pay any monies for the telecom equipments supplied to it. On 07.9.2000 petitioners No. 1 and 2 on one hand and respondents No. 1 to 3 on the other had entered into a settlement agreement under which the respondents were made jointly and severally liable to pay to Alcatel India Limited a total sum of Rs. 75.00 crores in two Installments. First Installment of Rs. 35.00 crores was to be paid within 45 days of the settlement agreement i.e. by 22.10.2000 and the second Installment of balance amount of Rs. 40.00 crores was to be paid within two years i.e. by 07.9.2002. It was further provided in the settlement that if the first Installment was not paid by the due date, both Installments aggregating to Rs. 75.00 crores would become immediately and automatically payable by the respondents. The respondents did not pay the monies under the settlement agreement and so Alcatel initiated arbitration proceedings in London under LCIA Rules, as per arbitration clause contained in the settlement agreement.

3. The arbitral tribunal consisting of M/s Axel H. Baum (Chairman), Mr. Ian Glick QC (Co-arbitrator) (nominated by the petitioners) and Mr. P.V. Kapur, Senior Advocate appointed by the respondent Koshika was constituted in accordance with the arbitration rules of London Court of International Arbitration ("The LCIA Rules"). The petitioners made its claim for the recovery of Rs. 75.00 crores and interest thereon from the respondents while the respondents refuted its liability to pay the amount on the ground of alleged failure of Alcatel in cooperating with Koshika in getting the charge over the equipments released as per the terms of agreement. Hearings of the Arbitral Tribunal commenced in London but were stalled for some period on the plea of the respondent that an ex parte stay of the Arbitral proceedings had been granted by a City Court in Calcutta. The said stay order was ultimately vacated by the Court and the Arbitral proceedings re-commenced before the Arbitral Tribunal. It appears that the respondent through a representation to the LCIA expressed their apprehension of bias against the independence and impartiality of Mr. Axel H. Baum, Chairman of the Tribunal, which representation was considered by an independent Division comprising of three members constituted by the LCIA, who unanimously reached to the conclusion that Mr. Baum "had acted fairly and impartially with respect to the parties" and rejected the challenge.

4. The Arbitral Tribunal scheduled the oral hearing from 16th to 20th December, 2002 in London. A few days before the scheduled hearing, on 5.12.2002 respondent No. 1 informed the Arbitral Tribunal that one of its witnesses Mr. Suresh Sachdeva was suffering from severe asthama and had been advised not to travel to London and accordingly prayed to the Tribunal that hearing could be re-scheduled sometimes in January, 2003 at New Delhi, which was permissible under the arbitration clause. On receipt of the said request, Mr. Baum, Chairman of the Tribunal, after consulting the co-arbitrators on phone decided that the hearing shall proceed in London as scheduled but the examination of Mr. Sachdeva may take place by video conferencing, facility which was assured to the Tribunal by London Disputes Resolution Centre. The Tribunal, therefore, asked the respondent to make arrangements for the use of corresponding video conferencing facilities in New Delhi. The solicitors of the petitioners then addressed a communication dated 10.12.2002 to the respondent's counsel as also to the members of the Tribunal seeking their response as to the decision of the Tribunal in regard to the examination of Mr. Sachdeva through video conferencing.

5. Vide a communication dated 11.12.2002 M/s Dutt & Menon, advocates for the respondent sent a communication to the three members of the LCIA with a copy to M/s Slaughter & May, solicitors of the petitioners informing them that despite repeated requests made by them to the respondents, they were not getting any instructions in the matter nor they were put to any notice to enable them to go to London and conduct the case on their behalf and on account of that, they were put in an embarrassing situation and, therefore, requested the respondents to make alternative arrangements as the hearing was scheduled from 16.12.2002 to 20.12.2002. On receipt of the said letter, the Arbitral Tribunal made the following order on 12.12.2003:

"Dear Sirs:

The Arbitral Tribunal acknowledges, with thanks, receipt of the copy of Messrs. Dutt & Menon's letter of 11 December 2002 addressed to the three Respondents

Because of the uncertainty raised by the contents of that letter, and exceptionally, I am addressing a copy of this letter directly to Respondent Koshika as well as to Messrs. Dutt & Menon. Respondent Koshika is requested to ensure that copies are delivered immediately to the other two Respondents, Usha (India) Ltd and Utility Trade Links Pvt. Ltd.

In order to avoid any doubt or misunderstanding, the Arbitral Tribunal, after consultation among its members and with unanimity, wishes to confirm to all parties that the Hearing scheduled to begin in London on Monday, 16 December 2002, will take place as scheduled.

The letter from Messrs. Dut & Menon suggests uncertainty as to their instructions and as to who will be appearing at the Hearing beginning on 16 December 2002. For the avoidance of doubt, the Arbitral Tribunal reminds the Respondents that it is their responsibility to ensure that they and their witnesses are present and approximately represented at the Hearings.

The Arbitral Tribunal requests the Respondents to notify the Tribunal, and the Claimants and the LCIA, by return facsimile as to who will be appearing at the Hearing on their behalf, with a list of all persons who will be present. Respondents are also requested to inform the Arbitral Tribunal, with copies to the Claimants and the LCIA, as to what arrangements have been made for the video link examination of Mr. Sachdev."

6. On 14.12.2002, two days before the hearing, respondent No. 1 sent a fax to the members of the Arbitral Tribunal, which reads as under:

"This is with reference to the hearing to be held in London from 16th December, 2002 onwards. We request you to hold this hearing in January, 2003 in Delhi rather than in December, 2002 in London as we are finding it very difficult to arrange for our witnesses and counsels to attend the London hearing. It should be noted that the Arbitration Agreement between the parties also provides for the hearing to be held in Delhi."

7. On 16.12.2002 the above request of the respondent was considered by the Tribunal and the Tribunal made the following order:

"The Tribunal sitting in London has concluded that you and your counsel have had sufficient notice of today's Hearing and that you have been offered adequate opportunity for your witnesses to give evidence in person in London or by Video Link from Delhi.

In the circumstances the Tribunal has decided to proceed with the hearing in your absence."

8. The above order was communicated to the respondent through fax but respondent did not respond to the said communication. On 24.12.2002 the Tribunal confirmed the order of 16.12.2002 and directed the parties to submit on or before 31.12.2002 a statement of their cost incurred in the arbitration. The parties were also given time up to 10.01.2002 to submit comments and the statement of cost. The respondent remained unrepresented before the Arbitral Tribunal and on 28.5.2003 the Arbitral Tribunal made the final award as under:

"1. The Settlement Agreement entered into as of 7 September 2000 between Alcatel India Limited and Alcatel C.I.T. On the one hand, and Koshika Telecom Limited, Usha (India) Limited and Utility Trade Links Limited, on the other hand, is a valid and binding agreement.

2.The defenses raised by respondents, including without limitation those asserting that the Settlement Agreement is invalid or void, or that Respondents' obligations there under have been extinguished, or that Claimants have committed fraud or misrepresentation or acted in bad faith in connection with the Settlement Agreement, are rejected.

3.Respondents (Koshika Telecom Limited, Usha (India) Limited and Utility Trade Links PVT limited) are jointly and severally liable under the Settlement Agreement and shall pay to Alcatel India Limited or Alcatel C.I.T., or either of them, the amount of Seven Hundred Fifty Million India Rupees (INR 750 million) together with simple interest at the rate of eighteen percent (18 percent) per annum on such amount ( or any unpaid balance) from 22 October 2000 until the date of actual payment, such interest to accrue from day-to-day.

4.At such time as respondents make payment in full of all amounts required to be paid by this Award, Claimants (Alcatel India Limited and Alcatel C.I.T.) shall sign all documents and do all things reasonably requested of them, if any, in order to delete the Equipment Charge, if any, registered at the Indian Companies Registry in favor of Claimants.

5.Until such time as Respondents make payment in full of all amounts required to be paid by this Award, Claimants shall have the right to retain and to dispose of the Pledged Shares (being shares of Information Technologies (India) Limited), pursuant to the provisions of the Settlement Agreement, provided that (i) if and when Respondents make payment in full of all amounts required to be paid by this Award Claimants shall release the Pledged Shares or the balance (if any) thereof to Respondents free of any pledge or lien, and (ii) if at any time prior thereto Claimants sell or dispose of the Pledged Shares the proceeds (or any equivalent value) from such sale or disposal shall be deducted from the remaining balance of payments to be made there under.

6.Respondents shall be liable jointly and severally to pay all the costs of this Arbitration, as fixed by the LCIA Court, in a total amount of UK Pounds 188,109.74 (plus UK Pounds 7,623.71 TVA), consisting of the administrative costs and expenses of the LCIA in an amount of UK Pounds 17,060.27. Hearing Room costs in an amount of UK Pounds 6,234.26, and the fees and out-of-pocket expenses of the Arbitrators in the amount of UK Pounds 164,815.21. Claimants have heretofore paid in the entire advance against costs, in an amount of UK Pounds 195,733.45. Respondents shall therefore pay to Claimants, under joint and several liability, the net amount of costs advanced by Claimants, that is UK Pounds 188,109.74, together with simple interest thereon at the rate of eight per cent (8 per cent) per annum from the date of this Award to the date of actual payment, the interest to accrue from day-do-day.

7.Respondents shall in addition pay to Claimants, with joint and several liability, the legal expenses incurred by Claimants, including legal fees and disbursements and the expenses of providing hearing facilities, in a total amount of UK Pounds 688,703.90, together with simple interest thereon at the rate of eight per cent (8 per cent) per annum, from the date of this Award to the date of actual payment, the interest to accrue from day-to-day."

9. Along with the application, an application under Order 39 Rule 1 & 2 read with Section 151 CPC was also moved on behalf of the petitioners seeking inter locutory orders. Notice of the applications were issued to the respondents and respondent No. 1 has filed a detailed reply/objections to the enforcement of the foreign award dated 28.5.2003 challenging the award on a variety of grounds and pleas, important amongst them being that the Arbitral Tribunal was not properly constituted as the Arbitral Tribunal was headed by a presiding arbitrator on whose impartiality respondent No. 1 has justifiable doubts and had, in fact, represented to the LCIA which, however, was rejected. The next objection being about the Arbitral Tribunal having violated the principles of natural justice by not acceding to the request of the respondent for re-schedulement of the hearings of the Tribunal scheduled from 16.12.2002 to 20.12.2002. Besides, the foreign award is also stated to be against the public policy of India.

10. An application under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short SICA) was also filed on behalf of respondent No. 1 for stay of the proceedings. The petitioner has filed replies to the objections and the said application.

11. I have heard Mr.Manmohan, learned senior counsel representing the petitioners at length. Mr.Rajiv Nayar, learned senior counsel and Mr.Parag P.Tripathi, learned senior counsel for the respondents were also heard at some length because after advancing arguments in part and during the course of hearing unfortunately counsel for the respondents sought discharge from the case. However, before granting the discharge, the counsel was asked to communicate the respondent/objector to make alternate arrangement to argue the matter but when the matter was taken up after two days there was no representation at all on behalf of the respondents/objectors. Consequently vide an order dated 19.8.2004, the objections (EA 78/2004) filed by respondent No. 1 and EA 634/2004 (an application under Section 20 of the SICA filed by respondent No. 2) were dismissed in default and for non-prosecution and the respondents/objectors were ordered to be proceeded with ex parte against in the main application seeking enforcement and execution of the award.

12. Mr.Manmohan, learned senior counsel appearing for the petitioners has urged that once the objections of the respondents having been dismissed, the scope of the enquiry by the Court in the present proceedings has been restricted to only to clauses (a) and (b) of Section 2 of Section 48 of the Act. This appears to be the correct legal position having regard to the provisions of Section 48 of the Act, which is to the following effect:

"48. Conditions for enforcement of foreign awards.__

(1)Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that __

(a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(c.) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

(2) Enforcement of an arbitral award may also be refused if the court finds that__

(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation.__ Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause(e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security."

13. From a bare perusal of the above provision of the Act it would be quite apparent that the enforcement of foreign award can be refused on proving the existence of any one or more of the grounds mentioned in clauses (a) to (e) of sub-section (1) of Section 48. This can be done only at a request of the party against whom the foreign award is sought to be invoked and on proving the same. In the case in hand the respondent had no doubt raised objections against the enforceability of the award on the ground that the Arbitral Tribunal was not properly constituted as the presiding arbitrator had bias against the respondent; the award has been made against the public policy of India and the recognised principles of natural justice have not been followed, which can be said to fall under one or the above clauses (a) to (e) but the respondent has abandoned those objections in mid-way, i.e., during the course of hearing, which is a somewhat unusual course. This would show that either the objections lacked in substance or the respondent was not in a position to furnish to the Court proof about the existence of any of the grounds. The conduct of the respondent during the course of arbitral proceedings and even before this Court is writ large and it would show that the respondent had abandoned the arbitral proceedings as well as their objections in this Court absolutely without any rhyme and reason. They did so at their own risk and peril because they had sufficient notice that the hearing scheduled before the arbitrator from 16.12.2002 to 20.12.2002 will be held as scheduled and already notified and their request for re-scheduling the hearing in January, 2003 in New Delhi has been turned down. In the opinion of this Court the request for postponement of hearing etc. were not bona fide and were rather aimed simply to create possible ground(s) for challenging the award or raising objection about its enforceability as and when it was made by the Tribunal.

14. Even after dismissal of the objections of the respondent, this Court must examine the award with a view to assure itself that it is not hit by clause (a) and/or (b) of sub-section (2) of Section 48 of the Act. As regards clause (a), by no stretch it can be said that the subject matter of the dispute was not capable of settlement by arbitration under the Law of India. In the case in hand the settlement agreement dated 28.5.2003 provided for settlement of disputes/differences between the parties in relation to the said agreement through arbitration. Such a settlement agreement containing the arbitration agreement is strictly in consonance with the provisions of the Indian Contract Act and the Arbitration and Conciliation Act, 1996.

15. Now coming to the question as to whether the enforcement of the foreign award would be contrary to the public policy of India, Mr.Manmohan, learned senior counsel has urged that the defense of "public policy" has to be construed narrowly for the purpose of this section. In this connection he sought support from the judgment of the Supreme Court Renusagar Power Co. Ltd. Vs. General Electric Co., 1994, Suppl (1) SCC 644. The said case was answered on the strength of the provisions of Foreign Awards Act, 1961, which contained the provisions similar to the 1996 Act in regard to the enforcement of a foreign award. The Supreme Court held that in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the Court in which the award is sought to be enforced is limited to grounds mentioned in Section 7 of the said Act and did not enable a party to the said proceedings to impeach the award on merits. In para 65, the Court observed as under in relation to the expression "public policy":

"Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression "public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be 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."

16. It is equally settled legal position that while considering the question of enforcement of a foreign award, this Court would not investigate into the merits of the case so as to re-assess and decide the question of the adequacy or quality of the evidence adduced by the parties before the arbitrator because all this lies under the domain of the Arbitral Tribunal. The principle that the Court should not interfere with the Arbitral Tribunal merely because another view is possible on the interpretation of the contract would equally apply to the foreign awards. In the case in hand, there is no averment or allegation that the making of the award was induced or effected by fraud or corruption thereby bringing the award within the mischief of "conflict with the public policy of India". The respondent has not taken up any proceedings for setting aside or suspension of the award before the competent authority. In these circumstances this Court is clearly of the opinion that there is nothing to suggest that the award in question is in conflict with the public policy of India.

17. One question which has been agitating the mind of the Court was in regard to the maintainability and continuance of the present proceedings seeking enforcement and execution of the foreign award, in view of pending proceedings under SICA against respondent No. 1. In this regard Mr.Manmohan, learned senior counsel has urged that the question is premature at this stage because though the application contains the joint prayer for enforcing the award and its execution, nonetheless this Court can decide the question of enforceability at this stage and the question of execution and the continuance of the execution can be considered subsequently. In this connection he has placed reliance on a Supreme Court decision in the case of Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., . In that case a contention was raised by the party against whom the foreign award was sought to be enforced that the party holding the award must file a separate application and produce evidence as contemplated under Section 47 and also satisfy the conditions laid down under Section 48 and it is only after the Court decides about the enforceability of the award, it should be deemed to be a decree under Section 49 as available for execution. In other words, contention was that the party must separately apply for enforcement of award before filing an application for execution of a foreign award. The Supreme Court considered the question and repelled the contention observing that since the object of the Act is to provide speedy and alternative resolution to the dispute, the same procedure cannot be insisted upon under the new Act when it is advisedly eliminated. It was further held that if separate proceedings are to be taken, one for deciding the enforceability of a foreign award and the other thereafter for execution, it would only contribute to protracting the litigation and adding to the sufferings of a litigant in terms of money, time and energy. The Court explained that the only difference as found is that while under the Foreign Awards Act a decree follows, under the new Act the foreign award is already stamped as the decree. The Court ruled that a party holding a foreign award can apply for enforcement of it but once the Court decides that the foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There was no question of making foreign award a Rule of the Court / decree again.

18. The question in regard to the suspension of legal proceedings under Section 22 of the SICA was considered by this Court in the case of M/s Lloyd Insulations (India) Ltd. & Ors. Vs. Cement Corporation of India Ltd. & Anr., . The Court has in particular considered the aspect whether the expression "suit for recovery of money" appearing in sub-section (1) of Section 22 would include the proceedings pending before the Court under Sections 14 and 17 of the Arbitration Act, 1940. On examination, the Court held that the arbitration proceedings pending under Sections 14 and 17 of the Arbitration Act, 1940 could not be treated as "suits for recovery of money" and, therefore, were not covered by sub-section (1) of Section 22 of SICA. The Court further ruled that the term "award" appearing in sub-section (3) of Section 22 of SICA by necessary implications exclude the awards from the expression "suit" occurring in sub-section (1) of Section 22 of SICA.

19. In another case Tropic Shipping Company Ltd. Vs. Kothari Global Limited Arbitration Petition No. 89 of 1998, decided on 09.10.2001 the Bombay High Court was confronted with a similar situation in regard to the suspension of the proceedings for enforcement of a foreign award under Sections 46, 47 and 48, because of the pendency of the proceedings under SICA before the BIFR. The Court repelled the contention that it had no jurisdiction to grant enforcement of the award because of the pendency of SICA proceedings. The Court held that it is only when the Court is satisfied that the foreign award is enforceable that the award is deemed to be a decree of the Court and if proceedings for execution are initiated, only then the question of stay of the proceedings under Section 22 of SICA would arise. It is, therefore, apparent that the application so far as it seeks the relief of enforcement of the foreign award in question is maintainable and can be answered despite any proceedings initiated by respondent No. 1 under the provisions of SICA.

20. In the opinion of this Court, the petitioner has satisfied the conditions of Section 47 of the Act by filing the original award, a duly certified copy of the settlement agreement and there is ample proof on record that the award sought to be enforced is a foreign award. None of the grounds contained in Section 48 on the basis of which this Court can refuse the enforcement of the foreign award in question has been proved on record. The net result is that this Court is satisfied that the foreign award dated 28.5.2003 rendered by the LCIA is enforceable under Chapter 1 of Part II of the Act and consequently the award must be deemed to be a decree of this Court within the meaning of Section 49 of the Act. It is held so accordingly.

21. List on 14th September, 2004 for further consideration of the matter in regard to the execution of the decree.