Naval Gent Maritime Limited vs Shivnath Rai Harnarain (I) Ltd.
2009 Latest Caselaw 3816 Del

               * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                  Date of Reserve: 30.7.2009
                                                         Date of Order: 17th September, 2009

Ex. P. No. 275/2007
%                                                                                        17.09.2009

         Naval Gent Maritime Limited             ... Decree Holder
                        Through: Ms. Anuradha Dutt, Advocate with
                        Ms. Ekta Kapil, Mr. Anish Kapur &
                        Mr. Kuber Dewan, Advocate

                  Versus


         Shivnath Rai Harnarain (I) Ltd.        ... Judgment Debtor
                         Through: Mr. Chetan Sharam, Sr. Advocate with
                   Mr. Anshuj Dhingra and Mr. Anubhav Mehrota, Advs.


JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the
   judgment?                                                                                      Yes.

2. To be referred to the reporter or not?                                                         Yes.

3. Whether judgment should be reported in Digest?                                                 Yes.

JUDGMENT

The Execution Petitioner/Decree Holder filed this

petition/application for enforcement of foreign award dated 22.1.2001 under Part

II Chapter I of the Arbitration & Conciliation Act, 1996. Along with the petition,

the petitioner has filed a certified copy of the award, a certified true copy of the

Charter Party Agreement containing arbitration clause and a certified copy of the

notice issued to the respondent at the behest of Counsel for the Petitioner

seeking remittance of the amount in terms of the award and an affidavit of the

Solicitor of the petitioner to the fact that no appeal has been preferred against the

award in the country of its making i.e. England and the limitation for filing appeal

against the award expired on 19th February, 2001. The Judgment

Debtor/respondent put appearance in the Court on 5th November, 2007 when the

matter was taken up by the Court. The respondent sought time to file response

to the Execution Petition of the petitioner however, despite repeated

opportunities no application under Section 48 of the Arbitration & Conciliation

Act, 1996 was filed nor the response was filed to the Execution Petition. The

matter was ultimately fixed for arguments on enforceability of the award. On 3rd

July, 2009 none appeared for the Judgment Debtor, the Judgment Debtor was

proceeded ex parte. Thereafter, Judgment Debtor on 7th July, 2009 was

permitted to address arguments on the enforceability of the award.

2. The Counsel for the petitioner submitted that the petitioner had

complied with all conditions as laid down under Section 47 of the Arbitration &

Conciliation Act, 1996 to show that the award was enforceable in India. The

petitioner filed duly authenticated copy of the original award as required by the

law of this Court. The petitioner also placed on record duly certified copy of the

arbitration agreement between the parties. The award was in English language

so, no translation was required to be furnished and it was pleaded that the award

should be held enforceable.

3. The learned Counsel for the Judgment Debtor on the other hand

argued that the award was not an enforceable award on the following grounds:

1. The award had not yet become binding between the parties in view of

Section 66 of English Arbitration Act, 1996. An award made by Tribunal

in England pursuant to an arbitration agreement could only be enforced by

leave of Court in England. It was argued that unless leave of the Court in

England was sought the award would not be a binding award. Reliance

was placed also on Section 48(1)(e) of the Arbitration and Conciliation Act,

1996 (India) which reads as under:

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 -

                        x        x        x        x         x        x        x         x


                  (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."

It is argued that the issue whether the foreign award, sought to be

enforced in India under Section 48 has become „binding‟, has to be

determined in accordance with the laws of the country where it was made.

Therefore, an Indian Court under Section 48 may refuse to enforce a

foreign award if it has not yet become binding. Reference was made to

the commentaries of the Arbitration Act to press this point.

2. The second argument advanced by the learned Counsel for the Judgment

Debtor is that the award was contrary to public policy of India and was not

enforceable. He submitted that the learned Arbitrator had acknowledged

in para 25 of the award that the owners did not have a lien on the cargo at

the material times but they threatened the respondent that unless the

respondent did not agree to addendum 3 they would exercise a lien over

the cargo and/or divert the vessel en route to the first discharge port and

then delay entry to that port. This threat was a deliberate and calculated

breach of contract. It was stated that this threat amounted to duress and

the contract executed under duress was null and void. The learned

Arbitrator though observed that there was duress exercised by the owners

but still awarded amount in favour of the owner and did not consider

addendum 3 as null and void therefore the award was contrary to public

policy.

3. The third issue raised by the JD was that the award was not stamped as

per the Indian Stamp Act, and therefore was not enforceable. To press

this issued the JD relied on Gujrals v. M.A.Morris AIR 1962 P&H 167.

4. All the above contentions of the Judgment Debtor have been

refuted by the Decree Holder/petitioner and it was submitted that the issues

raised by the Judgment Debtor were not at all issues and the law on these issues

was well settled.

5. Part II of the Arbitration & Conciliation Act, 1996 deals with

enforcement of certain awards. Chapter I deals with the New York Convention

Awards and Section 44 defines "foreign award" 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 relationship, 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.

6. It is apparent that "foreign award" within the meaning of this

Chapter is an award of the Arbitrator which adjudicates the disputes of the nature

as given in Section between the parties on the basis of a written agreement.

When an award is given between the parties outside India in a country of New

York Convention, the validity of award can be challenged in that country in

accordance with law of that country. If the award is challenged in that country

and is set aside, the award cannot be set out in India as a "foreign award".

However, if it is not challenged in that country of origin and it is allowed to stand

and becomes final in the country of its origin, the award can be set out in India as

a "foreign award". Once it is set out in India as a "foreign award" its enforceability

in India has to be ascertained as per Indian Law. Section 46 of Arbitration &

Conciliation Act, 1996 provides that a foreign award would be enforceable and

shall be treated as binding for all purposes between the parties, if it is

enforceable in accordance with Chapter II. Section 47 obliges a party applying

for enforcement of a foreign award to produce before the Court following

documents:

(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.

7. In case these three documents are produced in the Court and the

Court is satisfied about the award being a foreign award accompanied with these

documents as evidence, the award is to be held enforceable unless the Court

refuses the enforcement of award in terms of Section 48 of the Arbitration &

Conciliation Act, 1996. Under Section 48 the Court can refuse to enforce a

foreign award only at the request of party against whom the award made is

invoked, only if that party furnishes to the Court proofs as envisaged under

Clauses 48 (1)(a) to (e). Enforcement of award can also be refused if the Court

finds that the subject matter of the difference was incapable of settlement by

arbitration under the law of India or the enforcement of award would be contrary

to public policy. Section 48(3) reads as under:

(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.

8. Section 48(1)(e) read with Section 48(3) of the Arbitration &

Conciliation Act, 1996 makes it clear that the competent authority in this case is

the authority of the country of origin, where the award has been made and the

party against whom the award has been made was in the process of taking steps

before the Courts of that country in challenging the award. The competent

authority is not the authority in India.

9. Had the JD taken steps to challenge the award in England and any

proceedings were pending between the petitioner and the respondent/Judgment

Debtor in England, it was reasonable for the Judgment Debtor to argue that the

award has not yet become final and binding between the parties. But once

Judgment Debtor had not challenged the award, the plea taken by the Judgment

Debtor that the award has not become binding is baseless. Reliance of

Judgment Debtor on the Rules of Supreme Court of England regarding

enforcement of award does not carry weight. Section 66 of the Arbitration Act,

1996 of England is in respect of enforcement of award made in England by the

Courts of England. JD‟s contention that this Court under Section 48 should

refuse the enforcement of award since it has not yet become binding in England

does not stand the scrutiny of law. Section 66 of Arbitration Act of England is in

the nature of Section 17 of Arbitration Act, 1940 (old Indian Arbitration Act) where

the Court makes a domestic award as a Rule of Law. Under Section 66, the

English Court has to hold if the award was enforceable and binding after

ensuring that the award satisfies certain conditions. Section 66 of Arbitration Act

of England has therefore no application in India for determining in India whether

a foreign award (even if given in England) was binding or not. The Courts in

India have to consider the enforceability of the foreign award in accordance with

Part II of the Arbitration & Conciliation Act, 1996 and have not to see if the award

satisfies Section 66 of English Arbitration Act, 1996.

10. Madras High Court in Compania Naviera „SODNOC‟ v. Bharat

Refineries Ltd. and Mr. Christopher J.W.Moss AIR 2007 Madras 251, in a similar

situation, rejected the applicability of Section 66 of the England Arbitration Act,

while considering the enforcement of foreign award in India and observed that

the leave under Section 66 of England Arbitration Act is to be obtained only when

the award is to be enforced in England. I, therefore find no force in the plea of

the petitioner that the award has not become binding so that it can be considered

for enforceability in India.

11. The argument of the Judgment Debtor regarding the award being

contrary to public policy is based on the observation of the Arbitrator in the award

itself. The Arbitrator has elaborated as to what was the nature of duress and

how this duress was of no consequence. It was pleaded before the Arbitrator

that the Owners‟ conduct in threatening and alleging a lien over the cargo and

threat to divert the vessel en route to the first discharge port, and then delaying

the entry to that port, was a deliberate and calculated breach of contract and that

the pressure consequently exerted upon them by the Owners was unjustified,

unwarranted and illegal with the result that Addendum 3 had clearly been agreed

by the Charterers under duress whose buyers were demanding prompt delivery

of the cargo in West Africa. However, in view of the threat given, it had no option

but to sign Addendum 3, Addendum 3 having been obtained under duress was

not binding. On the other hand it was submitted by the owners that a contract

procured under duress was voidable and was not void abinitio and every threat

given by a person would not amount to economic duress and in case the

Charterers had entered into the contract of addendum 3 under duress, the

Charter would have revoked the contract soon thereafter. The owners also

pleaded that they were not aware during the voyage that they had no lien on the

cargo at material time. They understood it from their P&I Club that they had a

lien and a huge demurrage at the load port had already accrued due to delay.

For this reason they had acted under a bona fide belief about the existence of

their right of lien and they had threatened to exercise the right of lien. It was also

stated that they were under tremendous financial difficulties because of long

duration that had been experienced at the load port and it was therefore

necessary for them to act in order to compensate some cashflow to fund the

voyage. It was stated that this was economic necessity and they had justly

demanded to vary the terms of contract. The Counsel for the owner argued that

all it had really done was to demand an advance of monies that were bound to

fall due to them in any event in the future and thus the threat allegedly perceived

by the Charterers was not as great as suggested.

12. The learned Arbitrator after considering the trade tactics and the

evidence observed that the pressure exerted by the Owners upon the Charterers

though illegitimate must be considered in context. The context was that one of

the experienced owners and Charterers were in dispute as to the owners‟ right to

collect or secure the payment of demurrage before the discharge of cargo after a

lengthy stay at the load ports. Though the owners were not legally entitled to

exercise a right of lien or to deviate in order to recover demurrage but it was

suggested by the owners‟ to the charterers under a bona fide belief that they had

such rights and they would exercise such a right. The learned Arbitrator

accepted the plea of the owners of being under financial pressure at the time of

giving threat of exercising lien and held that it was not unusual or uncommon for

the owners to do this. He considered this as a typical of the brinkmanship

adopted by experienced parties jostling for position in the course of their

commercial activities and opined that the pressure was not so unusual,

uncommon or extraordinary as to vitiate the charterers consent or satisfy the

legal requirements of economic duress. He observed that even after this

addendum 3 signing, the correspondence between the parties continued over a

number of weeks and the owners on more than one occasion invited the

charterers to provide their comments on the Owners‟ calculations and forward

their calculations and this conduct of the respondent/Judgment Debtor was

inconsistent with any suggestion of persistent coercion. He concluded that it was

too late to argue that the contract was made under duress and it should not be

enforced. The contract at the most was not voidable and the Charterers by their

subsequent conduct affirmed the contract and lost any right to avoid the contract

(Addendum 3).

13. I find no infirmity in the reasoning given by the learned Arbitrator

regarding the issue of duress. The Arbitrator is the judge chosen by parties not

only to decide issues of facts but also to decide issues of law. Duress is a mixed

issue of law and facts. The Arbitrator has decided this issue after considering the

evidence of both the parties and material on record. This Court cannot sit in

appeal over the findings of the Arbitrator as to whether there was duress or not

and what was the effect of duress and whether the contract has been evaded or

not. I consider that decision of the Arbitrator on the issue of duress going against

the Judgment Debtor cannot be considered an issue of public policy and the

award cannot be held to be non-enforceable under Section 48(2) on the ground

of public policy.

14. The third issue raised by the Judgment Debtor is about non

stamping of the award. The Judgment Debtor has relied on Punjab & Haryana

High Court Judgment however, after this judgment of Punjab & Haryana high

Court, the Supreme Court in Harendera H. Mehta and Ors. v. Mukesh H.Mehta

and Ors. (1999) 5 SCC 108 observed as under:

44. A decree or order of a court does not require registration under clause (b) of sub-section(1) of Section 17 of the Registration Act. This is the effect of clause (vi) of sub-section (2) of Section 17. Earlier under this clause (vi) before its amendment in 1929 even an award did not require registration. However, after omission of the word "an any award" an award creating or declaring right or interest in immovable property of the value of Rs.100 would require registration. But then that award would be an award under the Arbitration Act, 1940 and certainly not a foreign award.

45. Let us examine this argument of Mr. Ganesh that a foreign award required registration from another angle. He said that the foreign award has already merged in the foreign judgment on the basis of which Mukesh has brought a suit in the Bombay High Court. A foreign judgment does not require registration as the process of suit having been decreed on that basis will have to be gone through. When a decree is passed by the court, it does not require registration in view of clause (vi) of sub-section (2) of Section 17 of the Registration Act. A decree or order of a court affecting the rights mentioned in Sections 17(1)(b) and 17(1)(c) would not require registration. It would, however, require registration where the decree or order on the basis of compromise affects the immovable property other than that which is the subject-matter of the suit or proceeding. Even a decree passed by the foreign court execution of which is sought under Section 44-A of the Code of Civil Procedure would not require registration. That being the position, we are of the view that a foreign award under the provisions of the Foreign Awards Act does not require registration under the Registration Act. In any case, in the present case the award creates a right to obtain transfer and closing documents which as regards Indian properties and businesses are yet to be executed by D.M.Harish & Co., Chartered Accountants. Decision of this Court in Tehmi P. Sidhwa case as rightly pointed by Mr. Dholakia, learned counsel appearing for the

respondents would be fully applicable and the argument that the award required registration has to be rejected on this ground as well.

15. In view of above judgment the foreign award would not require

registration and can be enforced as a decree. In any case the issue of Stamp

Duty cannot stand in the way of deciding whether the award is enforceable or

not. Supreme Court in M.Anasuya Devi & Anr. v. M.Manik Reddy and Ors.

(2003) 8 SCC 565 had observed that at the time of deciding objections under

Section 34 of the Arbitration & Conciliation Act, 1996, the Court cannot set aside

the award for want of stamping and registration. I consider that the Court while

deciding enforceability of foreign award under Sections 47 & 48 cannot hold the

award non-enforceable on the ground of award being not registered or

unstamped.

16. It is settled law that a foreign award can be enforced or executed in

the same proceedings as was held by the Supreme Court in Fuerst Day Lawson

Ltd. v. Jindal Exports Ltd. (2001) 6 SCC 356. The present award was passed in

England and it became binding between the parties since its validity was not

assailed by the Judgment Debtor in England. The Judgment Debtor did not

assail the award under Section 48 raising grounds as given in Section 48 of the

Act, or produce any evidence in respect of any of the grounds available to the

Judgment Debtor to resist the execution of the award. The issues argued by the

Judgment Debtor were on the basis of intrinsic material available on record. I

find no force in any of the issues raised by the Judgment Debtor. The present

award is held executable. The bank guarantee issued by the Judgment Debtor in

favour of the petitioner/Decree Holder and being renewed from time to time

under the directions of the Court is allowed to be encashed by the Decree

Holder. After getting the bank guarantee encashed , if any further amount

remains to be paid by the Judgment Debtor, Decree Holder would be at liberty to

take steps for further execution.

List this matter on 15th December, 2009.

September 17, 2009                                           SHIV NARAYAN DHINGRA, J.
vn