Delhi High Court
Fuerst Day Lawson Ltd vs Jindal Exports Ltd. on 11 December, 2009
Author: Manmohan
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP 29/2003
JINDAL EXPORTS LTD. ..... Petitioner
Through Mr. Ramesh Singh with Ms.
Anne Mathew, Mr. Suman Jyoti
Khaitan and Mr. Nitya Bagaria,
Advocates
versus
FUERST DAY LAWSON LTD. ..... Respondent
Through Ms. Ashwani Kumar, Senior
Advocate, with Ms. Sangeeta
Bharti, Ms. Nidhi Minocha,
Mr. Rahul Malik, Advocates
WITH
+ OMP 204/1998 & I.A. 4424/2006
JINDAL EXPORTS LTD. ..... Petitioner
Through Mr. Ramesh Singh with
Ms. Anne Mathew, Mr. Suman
Jyoti Khaitan and Mr. Nitya
Bagaria, Advocates
versus
FUERST DAY LAWSON LTD. ..... Respondent
Through Ms. Ashwani Kumar, Senior
Advocate, with Ms. Sangeeta
Bharti, Ms. Nidhi Minocha,
Mr. Rahul Malik, Advocates
AND
+ EX. P. 168/1998 & EAs 114/2006, 410/2006, 163/2007
FUERST DAY LAWSON LTD...... Decree Holder
Through Ms. Ashwani Kumar, Senior
Advocate, with Ms. Sangeeta
Bharti, Ms. Nidhi Minocha,
Mr. Rahul Malik, Advocates
versus
JINDAL EXPORTS LTD. ..... Judgment debtor
Through Mr. Ramesh Singh with
Ms. Anne Mathew, Mr. Suman
Jyoti Khaitan and Mr. Nitya
Bagaria, Advocates
OMP 29/2003 Page 1 of 49
AND
+ EX. P. 169/1998 & EAs 409/2006 & 162/2007
FUERST DAY LAWSON LTD...... Decree Holder
Through Ms. Ashwani Kumar, Senior
Advocate, with Ms. Sangeeta
Bharti, Ms. Nidhi Minocha,
Mr. Rahul Malik, Advocates
versus
JINDAL EXPORTS LTD. ..... Judgment debtor
Through Mr. Ramesh Singh with
Ms. Anne Mathew, Mr. Suman
Jyoti Khaitan and Mr. Nitya
Bagaria, Advocates
Reserved on : November 27, 2009
% Date of Decision : December 11, 2009
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment? Yes.
2. To be referred to the Reporter or not? Yes.
3. Whether the judgment should be reported in the Digest? Yes.
JUDGMENT
MANMOHAN, J
1. While OMP No. 29/2003 has been filed challenging the
enforceability of arbitration Award No. 1030 dated 30th August, 1996,
the Execution Petition bearing No. 168/1998 has been filed for its
enforcement. Similarly, while OMP No. 204/1998 has been filed
challenging the enforceability of Award No. 1034 dated 16th October,
1996, Execution Petition No. 169/1998 has been filed for its
enforcement. Since disputes between the same parties arise out of a
common contract, all the four petitions are being disposed of by a
common judgment.
2. The relevant facts in all the four petitions are that on 1st August,
1994 a contract was executed between M/s. Jindal Exports Ltd.
(hereinafter referred to as "petitioner") and Fuerst Day Lawson Ltd.
(hereinafter referred to as "respondent") for supply of 108 metric tons
of Indian Menthol Crystals @ US$ 9.25 per kg. less 2% commission to
the respondent. The shipment schedule indicated that supply was to be
made in three stages as under :-
i) January - June 1995 - 3 Full Container Loads at buyer‟s call.
ii) July - December1995- 6 Full Container Loads at buyer‟s call.
iii) January - June 1996 - 3 Full Container Loads at buyer‟s call.
3. The aforesaid contract as well as the relevant terms of the
General Conditions of Purchase accompanying the said contract read
as under :-
―Confirmation of Purchase Reference P64608 1st August,
Jindal Exports Ltd.,
C54/2, Wazirpur Industrial Area, New Delhi-110052, India
We (Buyers) have this day bought from you (Sellers) the
following goods in accordance with the following Special
Conditions and the General Conditions hereon and overleaf.
SPECIAL CONDITIONS
ARTICLE INDIAN MENTHOL CRYSTALS
BP/USP
DESCRIPTION: fair merchantable quality, Bold crystals
of the ―Panda‖ brand.
QUANTITY: 108,000 (One hundred and eight
thousand) kilos nett.
PACKING: in drums each containing 25 kilos nett to
be sound and suitable for shipment
PRICE: @US$9.25 ( Nine US Dollars Twenty
Five Cents) per Kilo CIF EMP/NY less
2% commission to Fuerst Day Lawson
Ltd.
WEIGHTS: certified nett shipping weights.
INSURANCE: against All Risks and War Risks as per
Institute Commodity Trades Clauses (A)
for at least 10% over the full CIF invoice
amount.
SHIPMENT: from origin 3 full container loads
between January and June 1995 at
buyers call, (continued on page 2)
PAYMENT: in London by net cash for the full invoice
amount on presentation of and in
exchange for documents and drafts
drawn at sight under irrevocable letter of
credit.
TERMS AND Documents - see page 2
CONDITONS: Each shipment position to be treated as a
separate contract. If goods shipped in
refrigerated containers price to be
increased by US$0.27 per kilo with costs
for buyers account.
All other terms and conditions as per IGPA Contract No. 9
(Including contract amendments current at the date of this
contract) in so far as they do not conflict with the terms and
conditions above and hereover. In the event of conflict it is
understood that the terms and conditions above and hereover
shall prevail.
xxxx xxxx xxxx xxxx
GENERAL CONDITIONS OF PURCHASE
xxxx xxxx xxxx xxxx
8. In default of fulfilment of this Contract by the Sellers,
the Buyers at their discretion shall have the right either to
cancel the contract or to purchase against the Sellers who
shall on demand make good the loss, if any, on such
purchase. If the Sellers shall be dissatisfied with the price of
such purchase, the damages, if any, shall, failing amicable
settlement, be determined by arbitration. The damages
awarded against the Sellers shall be the difference between
the Contract Price and the market price on the day of default
together with any additional damages which the Buyers may
directly or indirectly have suffered. Damages are to be
computed on the mean contract quantity. If for any reason
the Sellers fail to fulfil the Contract and are declared by the
Buyers to be in default and default is either agreed between
the parties or subsequently found by arbitrators to have
occurred, the date of default shall, failing amicable
settlement, be decided by arbitration or otherwise in
accordance with clause 17.
xxxx xxxx xxxx xxxx
17(1). This Contract shall be construed in accordance with
and governed by the laws of England and Wales. Save where
a contrary intention is expressed in the Special Conditions set
out overleaf, any dispute or difference arising between the
parties to this Contract as to the meaning of the Contract or
any matter or thing arising out of or connected with this
Contract shall, at Buyers' option and at any time after the
dispute or difference has arisen, be determined either:
17(1) 1. By the High Court of Justice in England; or
17(1) 2. By reference to arbitration in accordance with
Clause 17(2) hereof.
17 (2) If the Buyers opt for arbitration, such arbitration shall
be commenced and conducted.
17(2) 1. In accordance with the Rules of Arbitration of
any one of the following bodies:
a) The Grain and Feed Trade Association; or
b) The Federation of Oils, Seeds and Fats
Associations Ltd.;
c) The International General Produce Association
Ltd.;
d) The China International Economic and Trade
Arbitration Commission, in Beijing or by its Shenzhen
Sub-Commission in Shenzhen or by its Shanghai Sub-
Commission in Shanghai at the Buyer's option in accordance
with the Commission's arbitration rules in effect at the time
of applying for arbitration. The arbitral award is final and
binding upon both parties; or at Buyers' option under the
rules of arbitration of any other body or trade association of
their choice.
17(2) 2. In accordance with English Law in London by
two arbitrators experienced in the trade one to be nominated
by each party or if they shall fail to agree by an umpire who
shall also be experienced in the trade and who shall be
appointed by the two arbitrators. The arbitrators and umpire
shall have power to act upon such oral or documentary
evidence or information, without regard to the strict rules of
evidence, and to conduct the arbitration in such manner as
they or he may think fit and further to proceed with the
arbitration in the absence of either party unless the latter
gives written notice to his arbitrator at the time of the latter's
appointment of his desire to be present and give and or
adduce evidence.
17(3). The Buyers shall be entitled to nominate any of the
above options at any time after the dispute or difference has
arisen, the Sellers hereby acknowledging that they are
familiar with the Arbitration Rules of the Association thereby
nominated and agree to be bound by the decision of such
arbitrators or of any appeal therefrom.‖
4. It is the petitioner‟s case that due to excessive heat and extremely
low rainfall, mentha crop got badly damaged resulting in shortage of
crude mentha oil required for manufacturing Menthol Crystals and
consequently, suppliers of crude mentha oil backed out. Though
initially the respondent extended the time for shipment, on 20th
November, 1995 respondent wrote a letter to the petitioner stating that
petitioner was in repudiatory breach of its shipment obligation.
Respondent invoked the arbitration clause and claimed damages for
default.
5. Subsequently, on 14th December, 1995 respondent nominated its
arbitrator under the International General Produce Association Rules (in
short "IGPA Rules") and requested petitioner to appoint its own
arbitrator.
6. Despite number of requests and letters from IGPA, petitioner did
not appoint its arbitrator. Subsequently, on 24th January, 1996 IGPA
appointed Mr. R. Backer as petitioner‟s nominee on the Arbitral
Tribunal (in short "AT"). However, vide telefax message dated 25th
January, 1996 petitioner objected to IGPA appointing an arbitrator on
its behalf. The said message reads as under :-
"Received your Fax dated 24th Jan regarding Fuerst day
Lawson. We are really disappointed to note that in spite of
our reply dated 18th Jan you have appointed arbitrator on our
behalf without our consent and approval. We totally disagree
and disapprove that, please take note that we will not be
responsible in any manner for any decision taken by any
arbitrator appointed without our consent.
In case you will still want to proceed, please treat this Fax of
ours as our resignation from the membership of IGPA from
immediate effect.
In the meantime this is simply for your information that we
are closed for3 days starting from tomorrow the 26th Jan.
(Our Republic Day Holiday) till 28th Jan. I will be travelling
from 27th Jan. till 11th Feb. and will be back in office on 12th
Feb.‖
7. On the same date, i.e, 25th January, 1996, IGPA responded to
petitioner‟s letter. IGPA‟s response reads as under :-
"I acknowledge receipt of your fax of 25th January in respect
of the above case. Please be advised that the Association is
obliged to appoint an Arbitrator in accordance with Rule 1.
This Rule gives you the opportunity to do so, but we have not
received any notice of a nomination from you.
I also draw your attention to Rule 3(b)(ii) of the Rules of
Arbitration and Appeal concerning your reply submissions
and documents which reads:
―If the party against whom a claim is made wishes to reply,
such reply together with supporting documents shall be
despatched in writing to the Association in triplicate and to
the other party without delay but not later than 30 days from
receipt of the claimants submissions. Failing receipt of such
reply, the arbitrators shall proceed with the arbitration
without delay.‖
I shall refer your fax to the Arbitrators.‖
8. In pursuance to a query that arose for consideration before AT,
IGPA on 3rd May, 1996 wrote to the petitioner asking for petitioner‟s
view with regard to interpretation of Clause 8 of General Conditions of
Contract (in short "GCC"). The said letter dated 3 rd May, 1996 reads as
under :-
―I have been asked by the Arbitrators to advise you that they
intend to proceed to produce an award as soon as possible.
There is a possible question regarding conflicting rules, and
accordingly the arbitrators call on both parties to make
submissions within 15 days of the date of this communication
regarding the interpretation of Clause 8 in Buyer's ―house‖
terms vis-à-vis corresponding regulations regarding default
in the Association's terms and conditions. Upon receipt of
these submissions they shall be passed on to the other party
involved, whereupon said party shall have 15 days to
respond. Once these 15 days have passed, arbitrators will
proceed to consider this matter.‖
9. Though respondent filed its submission with regard to
interpretation of Clause 8, petitioner did not file any response. On 30th
August, 1996, the first impugned Award bearing No. 1030 was passed
against petitioner for US$ 408060 along with UK£ 2020 as costs. The
relevant portion of the first Award dated 30th August, 1996 reads as
under :-
WE FIND AND HOLD THAT :-
A. The contract calls for shipment of 6 full container
loads between July and December 1995 at buyers call;
B. Whilst Sellers shipped 2 container loads within the
period, and these were accepted by Buyers in part fulfillment,
Sellers expressed their intention not to ship further quantities
within the contracted period, and failed do so;
C. Sellers intention to ship goods towards the end of 1996
cannot be considered to fall within the terms of the contract
and was not accepted by Buyers;
D. The contract contains the express agreement that any
disputes arising out of the Contract are to be settled by
Arbitration according to the Rules of the International
Produce Association;
E. Disputes between Sellers and Buyers concerning other
contracts can have no bearing on the fulfillment of this
contract nor be considered by arbitrators in this dispute;
F. Buyers' interpretation of Clause 8 allows them to buy
in against Sellers, or rely on market difference as determined
by arbitrators. Sellers have not disputed this interpretation.
WE FURTHER FIND AND HOLD THAT :-
- Sellers are in default in respect of 4 full container
loads, and
- The default date is 20th November 1995.
WE DO HEREBY AWARD THAT Sellers shall pay to Buyers
within 14 days of the date of this AWARD the sum of US$
408,060.00....‖
10. Subsequently, on 16th October, 1996 second impugned Award
bearing No. 1034 was passed against petitioner for US$ 478050 along
with UK£ 2120 as costs.
11. It is pertinent to mention that while petitioner boycotted the
arbitral proceedings which culminated in Award No. 1030, petitioner
had filed its written submissions in second arbitral proceedings which
culminated in Award No. 1034.
12. In October, 1998, even when the present execution proceedings
were pending in this Court, petitioner filed an appeal before IGPA‟s
Board of Appeal challenging both the impugned Awards. However, on
14th November, 1998, the said Board of Appeal refused to hear the
petitioner‟s appeal on the ground of delay. Against the said order,
petitioner preferred an appeal. The High Court of Justice at London
dismissed petitioner‟s said appeal in limine.
13. Thereafter, proceedings initiated by petitioner and respondent in
this Court culminated in Supreme Court‟s judgment titled as Fuerst
Day Lawson Ltd. Vs. Jindal Exports Ltd. reported in (2001) 6 SCC
356. The relevant paras of the said judgment read as under :-
―31. Prior to the enforcement of the Act, the law of
arbitration in this country was substantially contained in
three enactments, namely, (1) the Arbitration Act, 1940, (2)
the Arbitration (Protocol and Convention) Act, 1937, and (3)
the Foreign Awards (Recognition and Enforcement) Act,
1961. A party holding a foreign award was required to take
recourse to these enactments. The Preamble of the Act makes
it abundantly clear that it aims at consolidating and
amending Indian laws relating to domestic arbitration,
international commercial arbitration and enforcement of
foreign arbitral awards. The object of the Act is to minimize
supervisory role of the court and to give speedy justice. In
this view, the stage of approaching the court for making the
award a rule of court as required in the Arbitration Act, 1940
is dispensed with in the present Act. If the argument of the
respondent is accepted, one of the objects of the Act will be
frustrated and defeated. Under the old Act, after making
award and prior to execution, there was a procedure for
filing and making an award a rule of court i.e. a decree. Since
the object of the Act is to provide speedy and alternative
solution to the dispute, the same procedure cannot be insisted
upon under the new Act when it is advisedly eliminated. 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. Avoiding such difficulties is one of
the objects of the Act as can be gathered from the scheme of
the Act and particularly looking to the provisions contained
in Sections 46 to 49 in relation to enforcement of a foreign
award. In para 40 of Thyssen judgment already extracted
above, it is stated that as a matter of fact, there is not much
difference between the provisions of the 1961 Act and the Act
in the matter of enforcement of foreign award. 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. Thus, in our view, a party
holding a foreign award can apply for enforcement of it but
the court before taking further effective steps for the
execution of the award has to proceed in accordance with
Sections 47 to 49. In one proceeding there may be different
stages. In the first stage the court may have to decide about
the enforceability of the award having regard to the
requirement of the said provisions. Once the court decides
that the 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 a rule of court/decree
again. If the object and purpose can be served in the same
proceedings, in our view, there is no need to take two
separate proceedings resulting in multiplicity of litigation. It
is also clear from the objectives contained in para 4 of the
Statement of Objects and Reasons, Sections 47 to 49 and the
scheme of the Act that every final arbitral award is to be
enforced as if it were a decree of the court. The submission
that the execution petition could not be permitted to convert
as an application under Section 47 is technical and is of no
consequence in the view we have taken. In our opinion, for
enforcement of a foreign award there is no need to take
separate proceedings, one for deciding the enforceability of
the award to make it a rule of the court or decree and the
other to take up execution thereafter. In one proceeding, as
already stated above, the court enforcing a foreign award can
deal with the entire matter. Even otherwise, this procedure
does not prejudice a party in the light of what is stated in
para 40 of Thyssen judgment.
32. Part II of the Act relates to enforcement of certain foreign
awards. Chapter 1 of this Part deals with New York
Convention awards. Section 46 of the Act speaks as to when a
foreign award is binding. Section 47 states as to what
evidence the party applying for the enforcement of a foreign
award should produce before the court. Section 48 states as
to the conditions for enforcement of foreign awards. As per
Section 49, if the court is satisfied that a foreign award is
enforceable under this Chapter, the award shall be deemed to
be a decree of that court and that court has to proceed further
to execute the foreign award as a decree of that court. If the
argument advanced on behalf of the respondent is accepted,
the very purpose of the Act in regard to speedy and effective
execution of foreign award will be defeated. Thus none of the
contentions urged on behalf of the respondent merit
acceptance so as to uphold the impugned judgment and
order. We have no hesitation or impediment in concluding
that the impugned judgment and order cannot be sustained.‖
(emphasis supplied)
14. Mr. Ramesh Singh, learned counsel for petitioner submitted that
the impugned Awards were not a „foreign award‟ within the meaning of
Sections 44 and 47 of Act, 1996 and Article II of the New York
Convention. Sections 44 and 47 of Act, 1996 and Article II(1) of the
New York Convention read as under :-
―44. Definition. -In this Chapter, unless the context otherwise
requires, ―foreign award‖ means an arbitral award on
differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under
the law in force in India, made on or after the 11th day of
October, 1960-
(a) in pursuance of an agreement in writing for arbitration
to which the Convention set forth in the First Schedule applies,
and
(b) in one of such territories as the Central Government,
being satisfied that reciprocal provisions have been made may,
by notification in the Official Gazette, declare to be territories
to which the said Convention applies.
xxxx xxxx xxxx xxxx
47. Evidence. -(1) The party applying for the enforcement of a
foreign award shall, at the time of the application, produces
before the court-
(a) the original award or a copy thereof, duly authenticated
in the manner required by the law of the country in which it
was made;
(b) the original agreement for arbitration or a duly certified
copy thereof, and
(c) such evidence as may be necessary to prove that the
award is a foreign award.
xxxx xxxx xxxx xxxx
THE FIRST SCHEDULE
(SEE SECTION 44)
CONVENTION ON THE RECOGNITION AND
ENFORCEMENT OF
FOREIGN ARBITRAL AWARDS
ARTICLE II
1. Each Contracting State shall recognise an agreement in
writing under which the parties undertake to submit to
arbitration all or any differences which have arisen or which
may arise between them in respect of defined legal
relationship, whether contractual or not, concerning a subject-
matter capable of settlement by arbitration.
(emphasis supplied)
15. According to Mr. Ramesh Singh, the foreign award had not only
to be an arbitral award in pursuance to an arbitration agreement but also
that agreement should have fulfilled the condition precedent mentioned
in the First Schedule in Article II, namely, (i) agreement should have
been in writing, (ii) under such agreement, reference of
differences/disputes to arbitration should have been agreed to, (iii) there
should have been an undertaking under such an agreement to dispose of
differences/disputes through arbitration and (iv) such undertaking
should have been given by all the parties to the agreement.
16. Mr. Singh submitted that Clause 17 of the Agreement to arbitrate
did not fulfill the requirements mentioned in (ii), (iii) and (iv)
hereinabove inasmuch as under the said Clause, buyer was free to opt
for court proceedings and not to invoke arbitration at all. He submitted
that a bare reading of Clause 17 made it evident that it was not the
intention of parties that arbitration was to be the sole remedy.
According to Mr. Singh, the purported arbitration clause lacked
mutuality and was unilateral. He submitted that at the highest, Clause
17 was an agreement to enter into a future arbitration agreement and,
therefore, the same was not enforceable. In support of his submission,
Mr. Singh relied upon following judgments :-
i) Wellington Associates Ltd. v. Kirit Mehta reported in (2000) 4
SCC 272 wherein Supreme Court has held as under :-
7. On the above submissions, the following points arise for
consideration:
(1) Whether clause 5 amounted to an arbitration
clause at all and whether such a question amounted to
a dispute relating to the ―existence‖ of the arbitration
clause? Whether such a question should be decided
only by the Arbitral Tribunal under Section 16 and
could not be decided by the Chief Justice of India or
his designate while dealing with an application under
Section 11?
(2) If the Chief Justice or his designate could decide
the said question, then whether clause 5 of the
agreements dated 15-8-1995 which used the words
―may be referred‖ required fresh ―consent‖ of the
parties before a reference was made for arbitration?
(3) What relief?
POINT 1
8. This point raises a question as to the scope of Section 16
on the one hand and Section 11 on the other.
9. Before referring to the said sections, I shall refer to the
relevant clauses 4 and 5 in the two agreements dated 15-8-
1995. They read as follows:
―4. It is hereby agreed that, if any dispute arises in
connection with these presents, only courts in Bombay
would have jurisdiction to try and determine the suit
and the parties hereto submit themselves to the
exclusive jurisdiction of the courts in Bombay.
5. It is also agreed by and between the parties that any
dispute or differences arising in connection with these
presents may be referred to arbitration in pursuance of
the Arbitration Act, 1940 by each party appointing one
arbitrator and the arbitrators so appointed selecting
an umpire. The venue of arbitration shall be at
Bombay.‖
xxxx xxxx xxxx xxxx
17. Further, a reading of sub-sections (4), (5) and (6) of
Section 11 shows that they enable the Chief Justice or his
designate to appoint an arbitrator or arbitrators, and likewise
Section 11(12) enables the Chief Justice of India or his
designate to appoint an arbitrator or arbitrators; under Rule
2 of the scheme framed by the Chief Justice of India, a
request is to be made to the Chief Justice of India along with
a duly certified copy of the ―original arbitration agreement‖.
Section 2(b) of the Act defines ―arbitration agreement‖ as an
agreement referred to in Section 7. Section 7 defines
―arbitration agreement‖ as follows:
―7. Arbitration agreement.--(1) In this Part,
‗arbitration agreement' means an agreement by the
parties to submit to arbitration all or certain disputes
which have arisen or which may arise between them in
respect of a defined legal relationship, whether
contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a
separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is
contained in --
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or
other means of telecommunication which
provide a record of the agreement; or
(c) an exchange of statements of claim and
defence in which the existence of the agreement
is alleged by one party and not denied by the
other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and
the reference is such as to make that arbitration clause
part of the contract.‖
The words in sub-section (1) of Section 7, ―means an
agreement by the parties to submit to arbitration‖, in my
opinion, postulate an agreement which necessarily or rather
mandatorily requires the appointment of an
arbitrator/arbitrators. Section 7 does not cover a case where
the parties agree that they ―may‖ go to a suit or that they
―may‖ also go to arbitration.
18. Thus, unless the document filed by the party before the
Chief Justice of India or his designate is an ―arbitration
agreement‖ as defined in Section 7 as explained above,
requiring a reference in a mandatory sense, no reference, in
my view, can be made to the Arbitral Tribunal. It is, as
already stated, indeed implicit -- if an objection is raised by
the respondent before the Chief Justice of India or his
designate that the so-called arbitration clause is not an
arbitration clause at all falling within Section 7 -- that such a
question will have to be decided in the proceedings under
Section 11 of the Act. Therefore the contention raised by the
learned counsel for the petitioner that the question -- whether
clause 5 of the agreement amounts to an arbitration clause --
is to be decided only by the Arbitral Tribunal is liable to be
rejected.
19. It is true that in Ador Samia (P) Ltd. v. Peekay Holdings
Ltd. it has been held that the Chief Justice or his designate
under Section 11(6) acts in an administrative capacity and he
does not exercise any judicial function and that he has no
trappings of a judicial authority. But this decision, in my
view, cannot support the plea raised by the petitioner in his
rejoinder. Even if the Chief Justice of India or his designate
under Section 11(12) is to be treated as an administrative
authority, the position is that when the said authority is
approached seeking appointment of an arbitrator/arbitrator
tribunal under Section 11 and a question is raised that there
is, to start with, no arbitration clause at all between the
parties, the Chief Justice of India or his designate has to
decide the said question.‖
ii) Jagdish Chander Vs. Ramesh Chander and Ors. reported in
2007(2) Arb. L.R. 302 (SC) wherein it has been held as under :-
―2. The appellant and first respondent entered into a
Partnership as per deed dated 9.1.1964 to carry on the
business under the name and style of 'Empire Art Industries'.
Clause 16 of the said Deed relates to settlement of disputes.
The said clause is extracted below:
―16. If during the continuance of the partnership or at
any time afterwards any dispute touching the
partnership arises between the partners, the same
shall be mutually decided by the partners or shall be
referred for arbitration if the parties so determine.
(emphasis supplied)
xxxx xxxx xxxx xxxx
8. ............ We may at this juncture set out the well
settled principles in regard to what constitutes an arbitration
agreement:
(i) The intention of the parties to enter into an arbitration
agreement shall have to be gathered from the terms of the
agreement. If the terms of the agreement clearly indicate an
intention on the part of the parties to the agreement to refer
their disputes to a private tribunal for adjudication and an
willingness to be bound by the decision of such tribunal on
such disputes, it is arbitration agreement. While there is no
specific form of an arbitration agreement, the words used
should disclose a determination and obligation to go to
arbitration and not merely contemplate the possibility of
going for arbitration. Where there is merely a possibility of
the parties agreeing to arbitration in future, as contrasted
from an obligation to refer disputes to arbitration, there is no
valid and binding arbitration agreement.
(ii) Even if the words 'arbitration' and 'arbitral tribunal (or
arbitrator)' are not used with reference to the process of
settlement or with reference to the private tribunal which has
to adjudicate upon the disputes, in a clause relating to
settlement of disputes, it does not detract from the clause
being an arbitration agreement if it has the attributes or
elements of an arbitration agreement. They are : (a) The
agreement should be in writing. (b) The parties should have
agreed to refer any disputes (present or future) between them
to the decision of a private tribunal. (c) The private tribunal
should be empowered to adjudicate upon the disputes in an
impartial manner, giving due opportunity to the parties to put
forth their case before it. (d) The parties should have agreed
that the decision of the Private Tribunal in respect of the
disputes will be binding on them.
(iii) Where the clause provides that in the event of disputes
arising between the parties, the disputes shall be referred to
Arbitration, it is an arbitration agreement. Where there is a
specific and direct expression of intent to have the disputes
settled by arbitration, it is not necessary to set out the
attributes of an arbitration agreement to make it an
arbitration agreement. But where the clause relating to
settlement of disputes, contains words which specifically
excludes any of the attributes of an arbitration agreement or
contains anything that detracts from an arbitration
agreement, it will not be an arbitration agreement. For
example, where an agreement requires or permits an
authority to decide a claim or dispute without hearing, or
requires the authority to act in the interests of only one of the
parties, or provides that the decision of the Authority will not
be final and binding on the parties, or that if either party is
not satisfied with the decision of the Authority, he may file a
civil suit seeking relief, it cannot be termed as an arbitration
agreement.
(iv) But mere use of the word 'arbitration' or 'arbitrator' in a
clause will not make it an arbitration agreement, if it requires
or contemplates a further or fresh consent of the parties for
reference to arbitration. For example, use of words such as
"parties can, if they so desire, refer their disputes to
arbitration" or "in the event of any dispute, the parties may
also agree to refer the same to arbitration" or "if any disputes
arise between the parties, they should consider settlement by
arbitration" in a clause relating to settlement of disputes,
indicate that the clause is not intended to be an arbitration
agreement. Similarly, a clause which states that "if the parties
so decide, the disputes shall be referred to arbitration" or
"any disputes between parties, if they so agree, shall be
referred to arbitration" is not an arbitration agreement. Such
clauses merely indicate a desire or hope to have the disputes
settled by arbitration, or a tentative arrangement to explore
arbitration as a mode of settlement if and when a dispute
arises. Such clauses require the parties to arrive at a further
agreement to go to arbitration, as and when the disputes
arise. Any agreement or clause in an agreement requiring or
contemplating a further consent or consensus before a
reference to arbitration, is not an arbitration agreement, but
an agreement to enter into an arbitration agreement in future.
iii) Jagatjit Jaiswal and Anr. v. Karmajit Singh Jaiwal reported in
2007 (4) Arb.L.R.300 (Delhi) wherein it has been held as under :-
―5. The MOFS also contained clause 9 whereby a Dispute
Resolution Committee (DRC) was to be constituted. The said
clause which calls for interpretation, reads as follows:
9. The Parties agreed to nominate and constitute
a committee hereinafter to be referred to as the
Dispute Resolution Committee comprising of
persons acceptable to them. It is agreed that the
Parties shall be bound to refer all disputes
between them relating to any matter or dealings
between the Parties that have any connection to
the affairs of any of the Companies or otherwise
and the decision of the Committee shall be final
and binding on the Parties. The Parties agreed
and undertook to abide by all decisions of the
Committee whether the Committee chooses to act
as arbitrator or as umpire or referee.
Accordingly, the Parties have agreed not to take
recourse to litigation to resolve disputes or
differences between them.
xxxx xxxx xxxx xxxx
55. The next issue which arises for consideration is,
what is the effect of clause 9 providing for an option to
the DRC to either act as an Arbitrator or as an expert?
In Wellington Associates Ltd(supra) the clause under
consideration before the Court gave discretion to the
party to file a suit to resort to arbitration. The Court
held that since either of the forums could be approached
by the parties there was no obligation to refer matters to
arbitration and thus, there was no arbitration
agreement. It was ―not the intention of the parties that
arbitration is to be the sole remedy‖. Thus, unless there
is a clear and unequivocal intention expressed in the
written agreement, to resort to arbitration alone, an
arbitration agreement does not comes into existence.‖
iv) Emmsons International Ltd. Vs. Metal Distributors (UK) and
Anr. reported in 116(2005) DLT 559 wherein it has been held as
under:-
―4. Clause 13 of the contract between the parties on the
strength of which the defendant No. 1 has moved the present
application and has raised the objection about the jurisdiction
of this Court to entertain and try the suit of the plaintiff is a
material one and is reproduced below for the facility of
reference:
"Governing Law and Forum for Resolution of
Disputes- This contract shall be construed in
accordance with and governed by English Law.
Sellers shall be entitled at their opinion, to refer
any dispute arising under this contract to
arbitration in accordance with the rules and
regulations of the London Metal Exchange or to
institute proceedings against buyers in any
Courts of competent jurisdiction."
xxxx xxxx xxxx xxxx
11. On the other hand, Mr. V. K. Sharma, learned Counsel for
the plaintiff, has argued that the Clause 13 is not capable of
enforcement because it is against the public policy and also hit
by the provisions of Section 28 of the Contract Act inasmuch as
it does not give any right or remedy to the plaintiff e.g. the
buyer of the goods for the redressal of his grievance/for
resolution of any disputes/claims raised by him in relation to
the supplies made under the said contract. A reading of Clause
13 would clearly show that it is a unilateral cause because it
gives all the right to the sellers i.e. defendants to refer any
dispute arising under the Contract through the mechanism of
Arbitration in accordance with the Rules and Regulation by
instituting the proceedings against the buyers and it does not
give any corresponding rights to the buyers i.e. plaintiff in the
present case. Such a clause would be hit by Section 28 of the
Indian Contract Act, 1872, and will not enforceable as has
been held by this Court in the case of A. V. N. Tubes Ltd. v.
Bhartia Cutler Hammer Ltd., 46 (1992) DLT 453 (DB)=1992
(2) Arbitration Law Reporter 8. In this case the Court
considered the effect of a similar clause which was to the
following effect:
―Without prejudice to the above Clause 17, of the
Contract the Company, M/s. AVN Tubes Limited,
reserves its right to go in for arbitration, if any
dispute so arisen is not mutually settled within 3
months of such notice given by the Company to
the Contractor. And, the award of the
Arbitration, to be appointed by the Company,
M/s. AVN Tubes Limited, shall be final and
binding on both the Company and the
Contractor.‖
12. The Court on a reading of the aforesaid arbitration clause
held that M/s. A.V.N. Tunes Ltd. alone has been given the right
to go in for arbitration. Not only this, the aforesaid course has
to be followed only at the instance of the company by giving
three months notice if the dispute is not mutually settled
between the parties; and thirdly, the right to appoint an
arbitrator has been given only to M/s. AVN Tubes Limited and
the decision of the Arbitrator of M/s. AVN Tubes Ltd. is to be
considered final and binding on both the parties. The Court
held that cumulative effect of all the three clauses was that it is
unilateral agreement. In case, any one of the clauses alone had
been there, that by itself may not have made the agreement
unilateral. The Court finally ruled that the said agreement was
clearly unilateral and not enforceable in a Court of Law.
xxxx xxxx xxxx xxxx
―15. The basis of the above legal provision is that no man can
exclude himself from the protection of Courts by contract. In
other words, every citizen has the right to have his legal
position determined by the ordinary tribunals, except, subject
to contract (a) when there is an arbitration clause which is
valid and binding under the law; and (b) when parties to a
contract agree as to the jurisdiction to which dispute in respect
of the contract shall be discharged. The section renders void
those agreements which absolutely restrict a party to a contract
from enforcing the rights under that contract in ordinary
tribunals. As noticed above, Clause 13 of the agreement
between the parties in the case in hand imposes an absolute bar
on the buyer of the goods i.e. the plaintiff from enforcing its
rights under the contract before ordinary tribunals or through
the Alternate Dispute Resolution mechanism. In the opinion of
this Court, such type of absolute restriction is clearly hit by the
provisions of Section 28 of the Contract Act besides it being
against the public policy. Had it been a case where the
restriction imposed by the contract was against the
enforcement of the rights of the buyer before the ordinary
tribunals but the agreement had provided for selection of one
of several ordinary tribunals in which ordinarily a suit would
lie, the defendant would have been within its right to enforce
such an agreement.‖
17. Mr. Singh next submitted that the composition of AT was neither
in accordance with Agreement executed between the parties nor in
accordance with the English Arbitration Act, 1950, which applied to the
present proceedings. This, according to Mr. Singh, was for the reason
that neither Clause 17 of GCC nor IGPA Rules prescribed any
procedure in case a party defaulted in appointing its arbitrator. Hence,
according to Mr. Singh, the provision of English Arbitration Act, 1950
would apply according to which there could only be a sole arbitrator.
18. Mr. Singh further submitted that the parties had agreed to an ad
hoc arbitration, that is, IGPA Rules and not an institutional arbitration
and, therefore, the appointment of an arbitrator by IGPA on petitioner‟s
behalf was not in accordance with the Agreement executed between the
parties. He further submitted that the purported foreign Awards dealt
with respondent‟s claims which were not contemplated by the parties to
be referred to arbitration and as such did not fall within the ambit of
purported arbitration clause. According to Mr. Singh, the arbitration
could have commenced by virtue of Clause 8 of GCC only if
respondent had made a risk purchase against petitioner on its default to
supply goods under the contract.
19. Mr. Singh next stated that in the present case, petitioner was
unable to present its case as Rule 3(g) of IGPA Rules did not allow any
legal representative to present the case of the parties. He pointed out
that as the petitioner did not have any office in England and was not
familiar with English law, petitioner was prejudiced. Rule 3(g) of
IGPA Rules reads as under :-
―3. PROCEDURE FOR ARBITRATIONS
xxxx xxxx xxxx xxxx
(g) If either party has expressed a wish to be
present, the arbitrators or the umpire shall give
reasonable notice to the parties of the date, time and
place when any oral evidence or additional
submissions may be heard and both parties to the
arbitration or their authorised representatives may
attend any such hearing but may not have present or
be represented by counsel, solicitor or any member of
the legal profession wholly or principally engaged in
legal practice.‖
20. Mr. Singh next submitted that the impugned Awards were
contrary to public policy of India as not only the same were passed on a
notional and not a real loss but they also awarded claims beyond 2% of
value of the contract, that means, respondent‟s entitlement. In this
context, he referred to and relied upon the case of Usha Beltron Ltd.
Vs. Nand Kishore Parasramka and another reported in AIR 2001
Calcutta 137 wherein it has been held as under :-
―44. The learned Counsel of the defendant company rightly
submitted that loss of damages must be actual and not by way
of punishment. Damages are obviously required to be in the
nature of compensation and it cannot be a penal one. As no
actual purchase had been made by the plaintiff firm on the
alleged failure of the defendant company to supply the balance
quantity of the ordered material the plaintiff No. 2 admittedly it
could not suffer any loss and the question of suffering any
damages or quantification of such damages under such
circumstances, therefore, does not arise. It has been held by
the various courts that damages can be quantified only by way
of compensation for loss suffered and not by way of
punishment. The learned Counsel of the defendant company
cited following decisions which are very much relevant in this
regard.......‖
21. According to Mr. Singh, the impugned foreign Awards were
opposed to public policy inasmuch as they were procured by
inducement and were affected by fraud and corruption. Mr. Singh
stated that respondent had mischievously opted for IGPA Rules because
respondent had complete control over IGPA. He stated that
representative of respondent was a Member of Managing Committee of
IGPA.
22. Mr. Singh also stated that petitioner was not given proper notice
for appointment of an arbitrator as well as proper notices of arbitral
proceedings, which were held behind the back of the petitioner.
23. Mr. Singh lastly submitted that purported foreign Awards sought
to be executed had not yet become final under the law of the contract
under which they had been passed. He submitted that in accordance
with Section 26 of the Arbitration Act, 1950 (England) it was a
condition precedent that an award made by an Arbitral Tribunal in
England could only be enforced after leave of English Court had been
obtained. According to Mr. Singh, if the award could not be enforced
in England, it could not be enforced in India.
24. On the other hand, Mr. Ashwani Kumar, learned senior counsel
for respondent stated that this Court must approach the matters with a
pro enforcement bias and the Court must lean in favour of sustaining
the validity of the arbitration agreement. He submitted that courts must
give due weightage to the autonomy of the parties in construing the
arbitration and procedures thereof. In this connection, Mr. Kumar
relied upon Sime Darby Engineering Sdn. Bhd. Vs. Engineers India
Ltd. reported in (2009) 7 SCC 545 wherein Supreme Court has held as
under :-
―28. .......The parties' autonomy in the arbitration agreement
must be given due importance in construing the intention of
the parties.‖
25. Mr. Kumar also relied upon the following passage in Russell on
Arbitration, Twenty-First Edition which reads as under:-
―2-003 The approach of the Courts. English law
respects the parties' freedom to enter into arbitration
agreements in the same way as it respects their freedom to
enter into other contracts. As a result the court gives effect to
arbitration agreements except in cases of hopeless confusion:
An agreement contained a clause referring ―any
dispute and/or claim‖ to arbitration in England. It
was followed by a clause referring ―any other
dispute‖ to arbitration in Russia. It was held that the
arbitration agreement was void for ambiguity, and was
neither effective nor enforceable.
However ―the court should if the circumstances allow lean in
favour of giving effect to the arbitration clause to which the
parties have agreed‖, and seek to give effect to their
intentions [Refer to Paul Smith Ltd. Vs. H&S International
Holdings Inc. (1991) 2 Lloyd's Rep. 127].‖
26. Mr. Kumar submitted that validity of the arbitration Clause and
constitution of AT was required to be decided with reference to the
agreement executed between the parties and in accordance with the
substantive and procedural law of the country in which and/or under
which the award had been rendered. Mr. Kumar relied upon Section
48(1)(a) of Act, 1996 and further pointed out that the applicable
governing law in the present case was the English law. He submitted
that any challenge with regard to arbitration clause was to be
determined with reference to the English law as stated in the contract.
27. Mr. Kumar stated that as both the parties had signed the contract
containing the arbitration clause, namely, Clause 17, the test of
mutuality was satisfied. He submitted that the parties were ad idem at
all time to the nature, effect and validity of the said arbitration clause.
He stated that said arbitration clause gave an option to the buyer at the
first instance to invoke arbitration in accordance with Clause 17.
According to Mr. Kumar, the arbitration mechanism was mandatory
with full implication thereof. He submitted that such clauses had been
upheld by Courts in England after applying the English law as well as
by the Courts in India.
28. Mr. Kumar next submitted that the Courts in England had upheld
the validity of clauses wherein one party had been given option to
choose any forum that means either Court or arbitration. In this
context, Mr. Kumar relied upon the following passage of Russell on
Arbitration, Twenty-First Edition which reads as under :-
―A time charter contained a conditional or optional
agreement to refer future disputes to arbitration, with the
English courts having jurisdiction if the option was not
exercised or the condition not met. The Court held that this
did not prevent it being a valid arbitration agreement‖
29. Mr. Kumar also submitted that the constitution of AT was in
accordance with the arbitration clause read with IGPA Rules of arbitration
and appeal. He pointed out that the objection with regard to constitution of
AT had neither been taken in the original objection petition bearing OMP
No. 203/1998 nor in the other connected OMP bearing No. 204/1998. He
also drew my attention to the correspondence exchanged between the
petitioner, IGPA Secretariat and Arbitrator to show that at no stage the said
objection was taken at the time of initiation of arbitration proceedings or
soon thereafter. In fact, according to Mr. Kumar, petitioner had actually
participated in its own way in the arbitration proceedings and acquiesced in
the same. He laid considerable emphasis on the fact that petitioner had filed
their written submissions before the A.T. in Award No. 1034. In this
connection, Mr. Kumar relied upon the following judgments :-
i) Narayan Prasad Lohia Vs. Nikunj Kumar Lohia & Ors. reported in
(2002) 5 SCC 572, para 16; and
ii) Prasun Roy v. Calcutta Metropolitan Development Authority
and Anr. reported in (1987) 4 SCC 217, paras 5, 6 & 7.
30. Mr. Kumar also pointed out that petitioner had not taken any
objection with regard to appointment of an Arbitrator by IGPA on their
behalf. According to Mr. Kumar, IGPA had rightly exercised its option
to appoint an arbitrator in terms of IGPA Rules I(a) (b), II and III.
31. Mr. Kumar submitted that interpretation of Clause 8 of GCC by
AT was correct and legal. He stated that the award of damages was
neither unconscionable nor opposed to public policy. He emphasised
that on complete reading of Clause 8, it cannot be said that it was
necessary for the respondent to first purchase the unsupplied cargo and
suffer damages, than alone claim compensation/damages. Mr. Kumar
further submitted that the contention of the petitioner that the
respondent was entitled only to 2% commission under the contract was
wrong. He submitted that all correspondence including the contracts
was on principal to principal basis and the alleged 2% commission was
only a discount offered by the seller to the buyer as was customary in
the commodity trade.
32. Mr. Kumar submitted that assuming without admitting that
interpretation of Clause 8 by the A.T. was contrary to the opinion of
this Court, this Court would not substitute its views for that of the
Arbitrator. In this context, Mr. Kumar relied upon the following
judgments :-
i) G. Ramachandra Reddy and Co. v. Union of India (UOI) and
Anr. reported in 2009 (6) SCC 414;
ii) Kwality Manufacturing Corporation v. Central Warehousing
Corporation reported in (2009)5SCC 142; and
iii) Smita Conductors Ltd. vs. Euro Alloys Ltd. reported in (2001) 7
SCC 328.
33. As far as issue of public policy was concerned, Mr. Kumar
submitted that public policy of India was to be narrowly construed and
there was no fraud or corruption in the present case. He pointed out
that Mr. Morris Lawson, the Managing Director of respondent-
Company was not the Member of the Governing Council of IGPA at
the relevant time.
34. Mr. Kumar further submitted that it was not necessary in
accordance with the English law that the foreign award made in
England should have been confirmed by the English Court only. He
submitted that in any event, the said issue stood decisively determined
by the Supreme Court of India in a judgment rendered inter se between
the parties, that is, Fuerst Day Lawson Ltd. (Supra). In this context, he
relied upon certain observations made by Supreme Court in paragraph
no. 31 of the said judgment.
35. Mr. Kumar lastly submitted that the respondent was entitled to
interest upon the Awards as the same was a money decree. In this
context, he relied upon Section 20 of the Arbitration Act, 1950
(England) along with judgments rendered by the Supreme Court in the
cases of Renusagar Power Co. Ltd. v. General Electric Co. reported in
1994 Supp (1) SCC 644 and Secretary, Irrigation Department,
Government of Orissa and others Vs. G.C. Roy reported in (1992)1
SCC 508.
36. In rejoinder, Mr. Ramesh Singh emphasized that petitioner had
advanced an argument on validity of the arbitration clause as
contemplated under Sections 44 and 47 read with New York
Convention and not Section 48(1)(a) of Act, 1996. He submitted that
Sections 44 as well as Article II of New York Convention of Act, 1996
itself suggested that it was the local law of the place where enforcement
was sought that would be the governing law with regard to enforcement
proceedings.
37. In the alternative, Mr. Singh submitted that as Part II of Act,
1996 which dealt with „foreign award‟ did not have a provision
defining arbitration agreement, then by virtue of Section 2(2) of Act,
1996, the definition as given in Section 7 of said Act, 1996 would
apply. In this context, he relied upon observations of Bhatia
International Vs. Bulk Trading S.A. and Anr. reported in (2002) 4
SCC 105.
38. Mr. Singh submitted in the alternative that as per conflict of law,
rules applicable for enforcement of a foreign award viz., Rule 62, it was
the local law of place where enforcement was sought, that would be the
law governing enforcement proceedings. The relevant portion of Rule
62 reads as under :-
―RULE 62(1) A foreign arbitration award will be enforced in
England whether or not the law governing the arbitration
proceedings requires a judgment or order of a court to make
the award enforceable.
(2) If a party obtains a foreign judgment by which a
foreign arbitration award is made enforceable, he may
enforce that judgment in England in accordance with Rules
35, 46, 47 and 49.
COMMENT
Clause (1) of the Rule. The enforcement in England of
foreign awards, like the enforcement of foreign judgments, is
governed by English law. Foreign law regulating the
enforcement of awards and in particular the need for
obtaining judgments thereon does not apply in England.
Hence a foreign award may be enforced in England though it
has not been made enforceable by judgment in its country of
origin and though the law of that country requires a judgment
of a court to make the award enforceable. If the English
court insisted on a foreign judgment in order to make the
award enforceable in England, it would ―not be enforcing the
award but the judgment,‖ i.e. the foreign award as such
might be deprived of all effect in England. The English
technique of enforcing an award applies to all proceedings
for enforcement of arbitral awards in England, whether the
awards are English or foreign. How the award can be made
enforceable under its own law is of no concern to the English
court......‖
39. Mr. Singh submitted that assuming without admitting that
applicable law was the English law, then also the law cited by
respondent was not the applicable English law inasmuch as the English
Arbitration Act of 1950 did not apply. He pointed out that the first
impugned Award had been rendered on 30th August, 1996, when the
new English Arbitration Act of 1996 had come into force, that is, on
17th June, 1996.
40. In the alternative, Mr. Singh submitted that the English law
would be the foreign law, the proof of which would have to be rendered
on the line of proving facts in a trial.
41. Mr. Singh next submitted that non-participation in appointment
of the arbitrator or before the arbitrator did not amount to
waiver/acquiescence. According to him, petitioner had to participate in
the arbitration proceedings before the issue of waiver/acquiescence
could be attracted.
42. Mr. Singh lastly submitted that in the present case the Arbitrator
had given no interpretation with regard to Clause 8 of GCC. According
to him, there was a complete abdication of the said exercise.
Consequently, according to him, the question of substituting the view of
the Arbitrator of interpretation did not arise at the first place in the
present case. He submitted that judgments cited by respondent with
regard to power of this Court to interpret a particular clause of the
contract were under the Arbitration Act, 1940 - which did not take into
account the new Section 28 of Act, 1996.
43. After hearing the parties, I am of the view that all the cases
proceed on admitted facts and the legal issues raised by petitioner have
to be determined in accordance with the directions given by the
Supreme Court in the judgment rendered in the case between the
parties. It is pertinent to mention that in para 33 of Fuerst Day Lawson
Ltd. (supra), the Supreme Court while remitting the case had directed
this Court ―for proceeding with enforcement of the award in the light of
the observations made‖. Consequently, what I have to first consider is
whether the impugned Awards are enforceable or not.
44. In my opinion, Part II Chapter I is an integrated scheme which
has to be applied to New York Convention awards. Mr. Ramesh
Singh‟s argument that validity of the arbitration clause between the
parties had to be tested under Sections 44 and 47 read with New York
Convention de hors Section 48(1)(a) of Act, 1996 is untenable in law.
In fact, Section 44 of Act, 1996 has to be read in conjunction with
Section 48(1)(a) of Act, 1996 and New York Convention as would be
apparent from the juxtaposition of the relevant portion of the said two
Sections along with the New York Convention which reads as under :-
―44. Definition. - In this Chapter, unless the context
otherwise requires, ―foreign award‖ means an arbitral
award .......
(a) in pursuance of an agreement in writing for
arbitration to which the Convention set forth in the
First Schedule applies...‖
xxxx xxxx xxxx xxxx
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...‖
xxxx xxxx xxxx xxxx
ARTICLE II.......
3. The Court of a Contracting State when seized of an action
in a matter in respect of which the parties have made an
agreement within the meaning of this article, shall, at the
request of one of the parties, refer the parties to arbitration,
unless it finds that the said agreement is null and void,
inoperative and incapable of being performed.‖
(emphasis supplied)
45. Consequently, on a conjoint reading of the relevant provisions of
Part II Chapter I of Act, 1996, I am of the opinion that any challenge to
the validity of the arbitration clause has to be determined with reference
to the substantive law governing the contract itself. In fact, the
expression „Agreement‟ in Sections 44 and 48 has to be given the same
meaning.
46. I am also fortified in this view by the following observations of
the Supreme Court in Shin-Etsu Chemical Co. Ltd. Vs. M/s. Aksh
Optifibre Ltd. and Anr. reported in AIR 2005 SC 3766 wherein it has
been held as under :-
―89. There is yet another strange result which may come
about by holding that Section 45 requires a final finding. This
can be illustrated by reference to the facts of the present case.
The parties here have subjected their agreement to the laws
of Japan. The question that will arise is: When a court has to
make a final determinative ruling on the validity of the
arbitration agreement, under which law is this issue to be
tested? This question of choice of law has been conclusively
decided by the judgment of this Court in National Thermal
Power Corpn. v. Singer Co. where it was observed:
―The proper law of the arbitration agreement is
normally the same as the proper law of the contract. It
is only in exceptional cases that it is not so even where
the proper law of the contract is expressly chosen by
the parties. Where, however, there is no express choice
of the law governing the contract as a whole, or the
arbitration agreement as such, a presumption may
arise that the law of the country where the arbitration
is agreed to be held is the proper law of the arbitration
agreement. But that is only a rebuttable presumption.‖
90. Thus, the proper law of the arbitration agreement is the
substantive law governing the contract itself. In the present
case, to effectively decide whether the arbitration agreement
is ―null and void, inoperative or incapable of being
performed‖, the court would have to apply the law to which
the contract has been expressly subjected, namely, Japanese
law. Obviously, proof of Japanese law (as applicable to
arbitration agreements) would have to be rendered on the
lines of proving facts in a trial.‖
(emphasis supplied)
47. In my opinion, the Court while testing the validity of the
arbitration agreement shall apply the proper law of the agreement and
not the law of the country where the awards are sought to be enforced.
Accordingly, I am of the view that the burden is on the petitioner to
prove that the arbitration agreement is invalid under the law to which
the petitioner subjected it, namely, the English law.
48. Though in the pleadings it was the petitioner‟s case that English
Arbitration Act, 1950 applied to the present proceedings, during
rejoinder it was sought to be urged that the new English Arbitration
Act, 1996 would apply. However, in my view, the English Arbitration
Act, 1950 would apply to the present proceedings as the arbitration had
commenced on 18th December, 1995 when a request for arbitration was
filed by the respondent, that means, much prior to coming into force of
the new English Arbitration Act, 1996 on 17th June, 1996.
49. In fact, the legality and validity of unilateral arbitration clause
has been upheld in England. Mustill and Boyd in Commercial
Arbitration, Second Edition have commented as under:-
―13. Unilateral arbitration clauses
Commercial contracts occasionally give a unilateral right of
arbitration. Sometimes they provide that claims by one party
are to be the subject of arbitration, whereas claims by the
other are not. In other cases, one party has an option to call
for arbitration, whilst the other party does not. Such clauses
are recognized by the Court as binding.‖
(emphasis supplied)
50. The English Court of Appeal, Civil Division in Pittalis and
Others Vs. Sherefettin reported in 1986 (2) All England Law Reports
227 has also upheld the legality of unilateral arbitration clauses. In
Pittalis (supra), the Court held as under :-
―......Peter Gibson J held that it was an essential attribute of
an arbitration clause that it gave either party the right to
refer the dispute to arbitration, and that, since the lessee had
a unilateral right to refer, there was no ‗agreement to refer
future disputes to arbitration'.
That decision was based on the statement by Davies LJ in
Baron V. Sunderland Corp. [1966] 1 All ER 349 at 351,
[1966] 2 QB 56 at 64 as follows:
‗It is necessary in an arbitration clause that each
party shall agree to refer disputes to arbitration; and
it is an essential ingredient [of an arbitration clause]
that either party may in the event of a dispute arising
refer it in the provided manner to arbitration. In
other words, the clause must give bilateral rights of
reference.'
The judgment of Davies LJ was concurred in by the
other two members of the Court.
In Tote Bookmakers Ltd v Development and Property
Holding Co Ltd [1985] 2 All ER 555 at 559, [1985] Ch. 261
at 266 Peter Gibson J, after observing that the statement of
the law by Davies LJ had been subjected to powerful criticism
in both Russell on Arbitration (20th edn, 1982) pp 38-43 and
Mustill and Boyd Commercial Arbitration (1982) p52, came
to the conclusion that, whatever his personal views on the
question, he was compelled as a matter of authority to follow
the statement in Baron v Sunderland Corp.
Looking at the matter apart from authority, I can see
no reason, why, if an agreement between two persons confers
on one of them alone the right to refer the matter to
arbitration, the reference should not constitute an arbitration.
There is fully bilateral agreement which constitutes a
contract to refer. The fact that the option is exercisable by
only one of the parties seems to me to be irrelevant. The
arrangement suits both parties. The reason why that is so in
cases such as the present and in the Tote Bookmakers case is
because the landlord is protected, if there is no arbitration,
by his own assessment of the rent as stated in his notice; and
the tenant is protected, if he is dissatisfied with the landlord's
assessment of the rent, by his right to refer the matter to
arbitration. Both sides, therefore, have accepted the
arrangement and there is no question of any lack of
mutuality.
The authorities prior to Baron v. Sunderland Corp.
lead me to the same conclusion.‖
xxxx xxxx xxxx xxxx
I do not think it is correct to say that the clause must
give bilateral rights of reference. All that is necessary is that
there shall be a contract which gives a right of reference
(whether unilateral or bilateral). That is present in this case.
xxxx xxxx xxxx xxxx
The result in my view is that the parties are entitled, if
they so choose, to confer a unilateral right to insist on
arbitration.
(emphasis supplied)
51. In fact, a careful reading of the Supreme Court of India‟s
judgment in Wellington Associates Ltd. (supra) reveals that though the
judgment of the English Court in Pittalis and Others (supra) was
specially noted by the Supreme Court, it was not dissented from. In
this connection, the following observations of the Supreme Court in
Wellington Associates Ltd. (supra) are relevant:-
―24. Before leaving the above case decided by the Rajasthan
High Court, one other aspect has to be referred to. In the
above case, the decision of the Calcutta High Court in Jyoti
Bros. Vs. Shree Durga Mining Co. has also been referred to.
In the Calcutta case the clause used the words ―can‖ be
settled by arbitration and it was held that fresh consent of
parties was necessary. Here one other class of cases was
differentiated by the Calcutta High Court. It was pointed out
that in some cases, the word ‗may' was used in the context of
giving choice to one of the parties to go to arbitration. But,
at the same time, the clause would require that once the
option was so exercised by the specific party, the matter was
to be mandatorily referred to arbitration. Those cases were
distinguished in the Calcutta case on the ground that such
cases where option was given to one particular party, the
mandatory part of the clause stated as to what should be done
after one party exercised the option. Reference to arbitration
was mandatory, once option was exercised. In England too
such a view was expressed in Pittalis Vs. Sherefettin,. In the
present case, we are not concerned with a clause which used
the word ―may‖ while giving option to one party to go to
arbitration. Therefore, I am not concerned with a situation
where option is given to one party to seek arbitration. I am,
therefore, not to be understood as deciding any principle in
regard to such cases.
25. Suffice it to say, that the words ―may be referred‖
used in clause 5, read with clause 4, lead me to the
conclusion that clause 5 is not a firm or mandatory
arbitration clause and in my view, it postulates a fresh
agreement between the parties that they will to go to
arbitration. Point 2 is decide accordingly against the
petitioner.‖
(emphasis supplied)
52. In Navigazione Alta Italia SpA Vs. Concordia Maritime Chartering
AB (The „Stena Pacifica") reported in (1990) 2 Llyod‟s Law Reports 234
the Queen‟s Bench Division (Commercial Court) upheld the validity of
optional arbitration agreements after observing as under :-
―The arbitration clause in the charter-party is cl.41 [which I
quote down to and including sub-c(i)]:
41 (a)This charter shall be construed and the relations
between the parties determined in accordance with the laws
of England.
(b) Any dispute arising under the charter shall be
decided by the English Courts to whose jurisdiction the
parties hereby agree.
(c) Notwithstanding the foregoing, but without
prejudice to any party's right to arrest or maintain the arrest
of any maritime property, either party may, by giving written
notice of election to the other party, elect to have any such
dispute referred to the arbitration of a single arbitrator in
London in accordance with the provisions of the Arbitration
Act 1950, or any statutory modification or re-enactment
thereof for the time being in force. (i) A party shall lose its
right to make such an election only if: (a) it receives from the
other party a written notice of dispute which - (1) states
expressly that a dispute has arisen out of this charter: (2)
specifies the nature of the dispute: and (3) refers expressly to
this clause 41(c).
Sub-clause c(i) provides machinery which may operate
to deprive a party of the right to choose arbitration, but it is
not suggested that this occurred in the present case.
The clause therefore submits all disputes to the
jurisdiction of the English Courts, subject to each party's
right ―to elect to have any such dispute referred to
arbitration‖ in accordance with cl. 41(c).
A similar though not identical clause was considered
in a different context by Mr. Justice Bingham in The
Messiniaki Bergen. [1983] 1 Lloyd's Rep. 424. Because the
actual clause has since been considered by the Court of
Appeal in The Amazona [1989] 2 Lloyd's Rep. 130, though in
a yet different context, I can summarize the relevant part of
Mr. Justice Bingham's judgment by saying that (1) he held
that the agreement is not merely an agreement to agree. On a
valid election to arbitrate‖...... no further agreement is
needed or contemplated‖; and (2) he ―saw force in the
contention that until an election is made there is no
agreement to arbitrate‖.
The Amazona, [1989] 2 Lloyd's Rep. 424, was
concerned with the question whether cl.41, which might
permit an election to arbitrate after the one year time limit
expired, was therefore void under art. III r.8. The Court of
Appeal described the clause as an option to arbitrate and
confirmed that until a valid election is made, the contract
provides for High Court jurisdiction rather than arbitration.
The defendants submit that cl. 41 permits the election
to be made only when a dispute has arisen. They say that
―any such dispute‖, in cl. 41(c), refers to ―any dispute
arising‖ in cl. 41(b), so that no notice can be given until a
dispute has arisen. Thus, the agreement in relation to future
disputes is that they will be subject to the Court's jurisdiction,
unless, when a dispute arises, a valid notice is given.
The plaintiffs challenge this. They say that ―any
dispute arising‖ is the common form of reference to the future
disputes and that a notice may be given in respect of any such
dispute, before or after it has arisen.
I am inclined to accept the plaintiffs' submissions on
this point, but I prefer to rest my judgment on their second
and wider contention, that even a conditional (or optional)
agreement to refer future disputes to arbitration, is
nevertheless ―an agreement to refer future disputes‖ within
the clause. It is a binding agreement (cf. Mr. Justice
Bingham quoted above) and it requires the parties to refer a
future dispute to arbitration whenever a valid election is
made. True, there is no reference of any particular dispute
until such an agreement does come into existence, but there
never can be an actual reference until after the dispute has
arisen. Before that, there can only be an agreement that
future disputes will be referred, and in my judgment the fact
that such an agreement depends upon the exercise of an
option, even by the party claiming arbitration, does not
prevent this from being ―an agreement to refer future
disputes‖ within the clause.‖
(emphasis supplied)
53. In Russell on Arbitration, Twenty-First Edition it has been
stated that mutuality is not a mandatory requirement. In the said
commentary, it has been stated as under :-
2-045 Mutuality no longer a requirement. Until 1986 it was
the law that an arbitration agreement had to be
―mutual‖: it had to give both parties the same right to
refer disputes to arbitration. The Court of Appeal have
redefined this requirement, seeing no lack of mutuality
in an agreement between two persons which conferred
on one of them alone the right to refer the dispute to
arbitration. As Fox L.J. said (in a rent review case):
―There is a fully bilateral agreement which constitutes a
contract to refer. The fact that the option is exercisable by one
of the parties only seems to me to be irrelevant. The
arrangement suits both parties ... the landlord is protected, if
there is no arbitration, by his own assessment of the rent as
stated in his notice: and the tenant is protected, if he is
dissatisfied with the landlord's assessment of the rent, by his
right to refer the matter to arbitration. Both sides have,
therefore, accepted the arrangement and there is no lack of
mutuality.‖
54. In my opinion, even if the English law did not apply, then also
upon a proper construction of the Disputes Resolution Mechanism as
contained in Clause 17 of the General Conditions of Purchase, there
was an irrevocable open offer by the grantor of the option, namely, the
petitioner to submit differences to arbitration and the power of
acceptance vested in the option holder namely, the respondent. When
the option was exercised and the offer accepted, the arbitration
mechanism became mandatory with full implications thereof.
Consequently, in my view, the petitioner‟s submissions that there was
no legally valid arbitration agreement, is contrary to the facts of the
case and untenable in law.
55. As far as the objection with regard to composition of AT is
concerned, I am of the view that present AT was constituted in
accordance with Rules of IGPA, in particular Rule 1 which reads as
under :-
―1. APPOINTMENT OF ARBITRATORS/UMPIRE
(a) The Association shall appoint arbitrator(s) who shall
be a member of the Arbitration and Appeal Panel of
the Association and who shall have accepted the
appointment except that if a member is a party to the
dispute, it may appoint its own arbitrator. Non-
members may state a preference for a particular
arbitrator at which the Association would have due
regard to him in the appointment procedure.
However, the two parties may be agreement accept the
appointment of a sole arbitrator from the Arbitration
and Appeal Panel, who shall have accepted the
appointment. Any reference to arbitrators in these
Rules shall also be taken to refer to a sole arbitrator.
(b) (i) Any objection to either arbitrator on the
grounds that either arbitrator was not eligible to serve
must be made in writing and established to the
satisfaction of the Management Committee of the
Association before the commencement of the
arbitration.
(ii) If such objection is made the Association in its
absolute discretion shall have the power to appoint a
substitute arbitrator or arbitrators from the
Arbitration and Appeal Panel up to the beginning of
the arbitration.
(iii) No Award of Arbitration shall be questioned or
invalidated on the ground of any irregularity in the
appointment of the arbitrators or umpire or on the
ground that any arbitrator or umpire was not eligible
to serve.
(c) If two arbitrators have been appointed they shall, if
and when they disagree, appoint an umpire from the
Arbitration and Appeal Panel. If the arbitrators fail to
agree on the appointment of an umpire, they shall
notify the Association which shall appoint an umpire
from the Arbitration and Appeal Panel.
(emphasis supplied)
56. From the aforesaid, it is apparent that by virtue of IGPA Rules,
IGPA alone had the power to appoint an arbitrator. However, in case
members of IGPA were a party to the arbitration, then the members had
an option to appoint an arbitrator. In fact, Rule 1 significantly uses the
expression ‗may' while giving the option to IGPA Members to appoint
an arbitrator. Since admittedly in the present case, petitioner did not
appoint an arbitrator despite being given number of opportunities to do
so, I am of the view that IGPA rightly exercised its power to appoint an
arbitrator. Consequently, the petitioner cannot raise a grievance on this
ground.
57. Though various grounds have been urged by Mr. Ramesh Singh
to contend that the impugned Awards were opposed to public policy, I
am of the view that the concept of public policy has to be narrowly
construed, that is to say violative of fundamental policy of law of India.
Neither the Court nor a party can import its own individual beliefs
about the "justice of the case", and then to try and fit its predilections
into the public-policy-ground. In my opinion, an expansive
construction of the concept of public policy would vitiate the New York
Convention‟s basic intent of removing obstacles to enforcement.
58. In Parsons & Whittemore Overseas Co., Inc. Vs. Societe
General De L‟industrie Du Papier (rakta) reported in United States
Court of Appeals, Second Circuit. - 508 F 2nd 969 it has been held as
under :-
―9. We conclude, therefore, that the Convention's public
policy defense should be construed narrowly. Enforcement of
foreign arbitral awards may be denied on this basis only
where enforcement would violate the forum state's most basic
notions of morality and justice. Cf. 1 Restatement Second of
the Conflict of Laws 117, comment c, at 340 (1971); Loucks
v. Standard Oil Co., 224 N.Y. 99, 111, 120 N.E. 198 (1918).
10. Under this view of the public policy provision in the
Convention, Overseas' public policy defense may easily be
dismissed. Overseas argues that various actions by United
States officials subsequent to the severance of American-
Egyptian relations-- most particularly, AID's withdrawal of
financial support for the Overseas-RAKTA contract--
required Overseas, as a loyal American citizen, to abandon
the project. Enforcement of an award predicated on the
feasibility of Overseas' returning to work in defiance of these
expressions of national policy would therefore allegedly
contravene United States public policy. In equating
‗national' policy with United States ‗public' policy, the
appellant quite plainly misses the mark. To read the public
policy defense as a parochial device protective of national
political interests would seriously undermine the
Convention's utility. This provision was not meant to
enshrine the vagaries of international politics under the
rubric of ‗public policy.' Rather, a circumscribed public
policy doctrine was contemplated by the Convention's
framers and every indication is that the United States, in
acceding to the Convention, meant to subscribe to this
supranational emphasis. Cf. Scherk v. Alberto-Culver Co.,
417 U.S. 506, 94 S. Ct. 2449, 41 L.Ed. 2d 270 (1974).‖
(emphasis supplied)
59. In fact, the Supreme Court of India in Renusagar Power Co. Ltd.
(supra) has observed as under :-
―66. .....This would mean that ―public policy‖ in Section
7(1)(b)(ii) has been used in a narrower sense and in order to
attract the bar of public policy the enforcement of award must
invoke something more than the violation of the law of India.
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.‖
(emphasis supplied)
60. The aforesaid principle law has been followed in the following
judgments :-
i) Smita Conductors Ltd. Vs. Euro Alloys Ltd. reported in (2001) 7
SCC 728;
ii) Transocean Shipping Agency (P) Ltd. Vs. Black Sea Shipping
& Ors. reported in (1998) 2 SCC 281;
iii) Alcatel India Limited & Anr. Vs. Koshika Telecom Limited &
Ors. reported in 2004 (3) Arb. L.R. 107 (Delhi);
61. I am of the view that it is wrong on the part of petitioner to state
that it was unable to present its case in view of the bar contained in
Rule 3(g) of IGPA Rules by virtue of which counsel are not permitted
to appear. In fact, from the material placed on record it is apparent that
petitioner is a well known exporter who was not only a member of
IGPA but was also aware of IGPA Rules. Consequently, to now raise a
grievance on the ground that Rule 3(g) was opposed to public policy is
clearly contrary to facts and untenable in law. In any event, from the
documents on record including the correspondence exchanged between
petitioner and IGPA and with the Arbitrators, I am of the opinion that
the petitioner had full opportunity to present its case. The procedure
adopted by the arbitrators was just and fair so as to lead to a just
decision. The requirement of fair hearing has been fully complied with
in the present case. In any case, this contention of the petitioner had
been negated in appeal by IGPA Board of Appeals and by the High
Court of Justice at London.
62. In the present case, there is also no material on record to show
that Mr. Morris Lawson, the Managing Director of respondent-
Company was a member of Governing Council of IGPA at the time
disputes arose between the parties.
63. As far as AT‟s interpretation of Clause 8 of GCC is concerned, I
am of the opinion that it cannot not be said to be unconscionable or
opposed to public policy. In my opinion, this submission is on merit of
the case which the parties consciously left to be determined by an
arbitral tribunal. In view of concepts of party autonomy and finality
attached to foreign award, I am of the opinion that I cannot entertain
this submission. However, even otherwise, I am in agreement with the
submission advanced by Mr. Kumar that it was not necessary for the
respondent to first purchase the unsupplied cargo and then alone claim
compensation. In fact, a Division Bench of this Court in the case of
Saraya Distillery Vs. Union of India & Anr. reported in AIR 1984
Delhi 360 has held as under :-
―(7) Learned counsel for the contractor contended that
before a party could claim damages he must go to the market,
purchase the goods not supplied or short supplied and suffer
actual loss. Only then, argued the learned counsel, he would
be entitled to damages. We do not agree.
xxxx xxxx xxxx xxxx
(10) The Supreme Court in the case of M/S Murlidhar
Chiranjilal v. M/s Harishchandra Dwarkadas and another
AIR 1962 SC 366 observed at page 369:
"The two principles on which damages in such cases
are calculated are well settled. The first is that as far
as possible, he who has proved a breach of a bargain
to supply what he contacted to get is to be placed, as
far as money can do it, in as good a situation as if the
contract had been performed; but this principle is
qualified by a second, which imposes on a plaintiff the
duty of taking all reasonable steps to mitigate the loss
consequent on the breach, and debars him from
claiming any part of the damage which is due to his
neglect to take such steps : (British Westing house
Electric and Manufacturing Company Limited v.
Underground Electric Rly. Co. of London (1912 AC
673 at p.689). These two principles also follow from
the law as laid down in S. 73 read with the
Explanation thereof. If, therefore, the contract was to
be performed at Kanpur it was the respondent's duty to
buy the goods in Kanpur and rail them to Calcutta on
the date of the breach and if it suffered any damage
thereby because of the rise in price on the date of the
breach as compared to the contract price, it would be
entitled to be reimbursed for the loss. Even if the
respondent did not actually buy them in the market at
Kanpur on the date of breach it would be entitled to
damages on proof of the rate for similar canvas
prevalent in Kanpur on the date of breach, if that rate
was above the contracted rate resulting in loss to it.
But the respondent did not make any attempt to prove
the rate for similar canvas prevalent in Kanpur on the
date of breach. therefore, it would obviously be not
entitled to any damages at all, for on this state of the
evidence it could not be said that any damage
naturally arose in the usual course of things."
Learned counsel for the Contractor relied on a judgment of a
learned single Judge of this court in Union of India v.
Tribhuwan Dass Lalji Patel AIR 1971 Delhi 120 . In this case
it was observed that the Government can recover the loss
only sustained by it and could not claim damages, if no loss
was sustained. With respect we do not agree with this view.
This is contrary to the observations made by the Supreme
Court in M/s Murlidhar Chiranjilal (supra). A division bench
of this court in All India Institute of Medical Sciences vs.
American Refrigeration Co. Ltd. AIR. 1982 Del 275 came to
the conclusion that the case Union of India v. Tribhuwan
Dass. (supra) was wrongly decided. We hereby overrule the
decision in Union of India v. Tribhuwan Dass.‖
(emphasis supplied)
64. Moreover, as held in Lesotho Highlands Development Authority
Vs. Impregilo SpA and others reported in 2005 UK HL 43, arbitrators
do not exceed their powers simply by making a mistake. In Burchell
Vs. Marsh reported in 58 U.S. 344 (1855), the United States Supreme
Court held that if an award is within submission, and contains an honest
decision of the arbitrators, then a Court would not set it aside for error,
either in law or fact. According to the United States Supreme Court, a
contrary course would be a substitution of the judgment of the judiciary
in place of the chosen forum, namely, the arbitrators and would make
the award the commencement, not the end of the litigation.
65. In fact, the Supreme Court in a catena of has held that in the
realm of interpretation of a contract, the arbitrators are supreme. One
such judgment under Act, 1996 is Mcdermott International Inc. vs.
Burn Standard Co. Ltd. reported in (2006) 11 SCC 181 wherein it has
been held as under:
―112. It is trite that the terms of the contract can be express or
implied. The conduct of the parties would also be a relevant
factor in the matter of construction of a contract. The
construction of the contract agreement is within the jurisdiction
of the arbitrators having regard to the wide nature, scope and
ambit of the arbitration agreement and they cannot be said to
have misdirected themselves in passing the award by taking into
consideration the conduct of the parties. It is also trite that
correspondences exchanged by the parties are required to be
taken into consideration for the purpose of construction of a
contract. Interpretation of a contract is a matter for the
arbitrator to determine, even if it gives rise to determination of a
question of law.‖
(emphasis supplied)
66. I am also of the view that it is not necessary in law for the foreign
award made in England to have been confirmed by an English Court
prior to its enforcement in India. In fact, this issue stands determined
by the Supreme Court in the afore-referred judgment inter se parties
wherein the Supreme Court in para 31 held that under the new Act,
1996, the foreign award is already stamped as a decree.
67. As far as Mr. Kumar‟s prayer for grant of interest is concerned, I
am of the view that I have no power to award interest as I am only
enforcing a foreign award. In my opinion, a Court dealing with
enforcement and execution of a foreign award has no power to go
behind the awards. Accordingly, Mr. Kumar‟s prayer for award of
interest is rejected.
68. Before I part with this judgment, I would like to place on record
my appreciation for the assistance rendered in the present case by
counsel for both the parties in particular the young counsel Mr. Ramesh
Singh.
69. In view of the aforesaid, OMP Nos. 29/2003 and 204/1998 are
dismissed but with no order as to costs. In the Execution Petition Nos.
168/1998 and 169/1998, the Judgment Debtor is directed to deposit the
decretal amount in the name of Registrar General of this Court within a
period of twelve weeks from today. List these execution petitions in
the category of „Short Matters‟ on 15th March, 2010.
MANMOHAN, J.
DECEMBER 11 , 2009
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