Hindustan Petroleum Cor. Ltd vs M/S Videocon Industries Ltd And ...
2012 Latest Caselaw 4101 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI


%                 Judgment pronounced on:       13.07.2012

+      O.M.P. 223/2006

       HINDUSTAN PETROLEUM COR. LTD           ..... Petitioner
                     Through: Mr. R. Sasiprabhu and Mr.                   R.
                              Chandrachud, Advocates
                versus

       M/S VIDEOCON INDUSTRIES LTD AND ORS       ..... Respondents
                      Through:  Mr. Neeraj Kishan Kaul, Sr. Adv.
                                with Mr. Anirudh Das, Mr. Prashant
                                Kalra and Mr. Rohan Dheman,
                                Advocates

+      O.M.P. 329/2006

       UNION OF INDIA AND ANR.                          ..... Petitioner
                       Through:       Mr. A.S. Chandhiok, ASG with Mr. R.
                                      Sasiprabhu      and      Mr.     R.
                                      Chandrachud, Advocates
                      versus

       VIDEOCON INDUSTRIES LTD. AND ORS. A+     ..... Respondents
                     Through:    Mr. Amit Sibal with Mr. Anirudh
                                 Das, Mr. Prashant Kalra and
                                 Mr.Rohan Dheman, Advocates

CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

                                  JUDGMENT

VIPIN SANGHI, J.

1. The present petitions have been preferred under Section 48 of

the Arbitration and Conciliation Act, 1996 (the Act) by the petitioners,

O.M.P. Nos. 223/2006 & 329/2006 Page 1 of 27 viz. Hindustan Petroleum Corporation Limited (HPCL) and Bongaigaon

Refinery & Petrochemicals Limited (BRPL) [in O.M.P. No.223/2006] and

Union of India and the Directorate General of Hydrocarbons (DGH) [in

O.M.P. No.329/2006] to seek a declaration that the partial award dated

31.03.2005 passed by the Arbitral Tribunal consisting of three learned

arbitrators, namely, Mr. Justice B.N. Kripal (Retd.), Mr. Justice G.T.

Nanavati (Retd.) and Mr. Justice J.K. Mehra (Retd.), is unenforceable

against the petitioners. A declaration is also sought that the demand

letter dated 22.08.2005, for Rs.1,24,427,492/- issued by respondent

No. 1 is unenforceable against the petitioners. The petitioners also

seek stay of the operation of the aforesaid partial award dated

31.03.2005, and of the aforesaid demand letter dated 22.08.2005.

2. The petitioner Nos. 1 and 2 in O.M.P. No. 223/2006 are Public

sector Companies, engaged in the business of purchase of crude oil for

the purpose of refining and selling the refined petroleum products.

3. Respondent No. 1, i.e. M/s Videocon Industries Ltd. (in both the

Petitions- which is also the contesting Respondent), is a company

incorporated in India and engaged in business of, amongst others,

exploration and exploitation of hydrocarbons.

4. The case of the petitioners is that the Government of India, being

the sole owner of natural resources, entered into a Production Sharing

O.M.P. Nos. 223/2006 & 329/2006 Page 2 of 27 Contract (PSC) dated 28.10.1994 with ONGC, Videocon Petroleum Ltd.,

Command Petroleum (India) Ltd. (now known as Cairn Energy), and

Ravva Oil (Singapore) Ltd., collectively referred to as the contractor,

for the Ravva Oil field, off the shore of Andhra coast.

5. Under the PSC, the contractor has the right to explore petroleum

in the area. The contractor is entitled to recover its cost and specified

profits from out of the petroleum produced. According to Article 19.1

of PSC the contractor is obliged to offer its share of production for sale

to the Government or its nominee.

6. The petitioner Nos. 1 and 2, in O.M.P. No. 223/2006, have been

nominated by the Government of India to purchase the crude oil

produced from the Ravva Oil field. The Government has also

nominated GAIL to purchase the gas produced from the field.

7. As disputes arose under the Contract, they were referred to

arbitration. In the arbitration proceedings, the respondent no.1,

Videocon Industries Ltd was the claimant and the UOI and the DGH

were the respondents. The arbitral tribunal has made its partial award

dated 31.03.2005, at London.

8. The respondent no.1 vide letter dated 22.08.2005 demanded

from UOI and DGH Rs. 1,24,427,492/- on the basis of partial award

passed by the tribunal.

O.M.P. Nos. 223/2006 & 329/2006 Page 3 of 27

9. Consequently, the petitioners have filed this petition for a

declaration that the partial award dated 31.03.2005, and the demand

made vide letter dated 22.08.2005 is unenforceable against them.

10. Upon issuance of notice, respondent No.1 entered appearance

and raised a preliminary objection regarding the maintainability of the

present petition.

11. I have heard learned senior counsels for the parties on the

limited aspect of maintainability of this petition. I proceed to decide

the issue of maintainability of the present petition under Section 48 of

the Act. I may note that the respondents have also challenged the

locus standi of the petitioners to maintain a petition under Section 48

of the Act. However, this aspect has not been argued before me by

either party and, therefore, is not being dealt with by me in this order.

Since I am dealing with a preliminary objection raised by the

contesting respondents. I first set out the respondent‟s preliminary

objection.

Respondent's submissions:

12. Mr. Kaul, learned senior counsel for respondent no. 1 in OMP

No.223/2006 and Mr. Sibal, learned counsel for the respondent no.1 in

OMP No.329/2006 submit that the award in question is a foreign award

and thus it is governed by the Part-II of the Act.

O.M.P. Nos. 223/2006 & 329/2006 Page 4 of 27

13. It is submitted that in contrast to Section 34 of the Act, Section

48 does not provide for or permit a challenge to a foreign award in

Courts in India. A party can only resist the enforcement of a Foreign

Award, as and when it is sought to be enforced. The Respondent

submits that no Petition under Section 48 can be filed, unless the

person who has succeeded in the arbitration seeks enforcement of the

Award. It is at that point of time that the successful party may be said

to have 'invoked' an award against the unsuccessful party, and it is

that invocation of an Award that gives rise to a cause of action for filing

an application under Section 48 of the Act. It is argued that the

respondents No. 1 & 2 have not yet invoked the partial award dated

31.03.2005. Consequently, this petition under Section 48 is not

maintainable.

14. Before I proceed to further record and discuss the respective

submissions of the parties, I consider it appropriate to take note of the

relevant provisions of the Act. Section 46 of the Act states:

"46. When foreign award binding. - Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award."

O.M.P. Nos. 223/2006 & 329/2006                                  Page 5   of 27
 15.    The manner in which a party may enforce a foreign award             is

dealt with in Section 47 of the Act, and the same reads as follows:

"47. Evidence. - (1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce 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.

(2) If the award or agreement to be produced under sub- section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India."

16. Section 48 of the Act provides for the conditions for enforcement

of foreign award under this Chapter, and the same reads as follows:

"48. Conditions for enforcement of foreign awards.- (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that----

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

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

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

O.M.P. Nos. 223/2006 & 329/2006 Page 6 of 27 Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

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

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

(2) Enforcement of an arbitral award may also be refused if the Court finds that-

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

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

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

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

17. It is submitted by the respondents that the language of Part II of

the Act makes it sufficiently clear that "invocation" under the Act

means the filing of a formal enforcement proceeding under Section 47

of the Act. The use of the word 'invocation' in Section 48(1), as

opposed to the use of the word "enforcement", is rooted in the fact

that 'enforcement' is a relief that only a Court can grant upon

O.M.P. Nos. 223/2006 & 329/2006 Page 7 of 27 'invocation' under Section 47 by the party seeking enforcement.

Therefore, a party can only "invoke" an Award by filing a Petition under

Section 47, while the Court will then decide whether it can be enforced

or not, after considering the objections, if any, that may be filed under

Section 48 of the Act. This is also why Section 47(1) clearly provides

"The party applying for enforcement of a foreign award shall ..... ......".

18. It is submitted that it is the act of a Party formally applying for

enforcement, that will give rise to the invocation of the Award. This

invocation will then provide an opportunity to the unsuccessful party to

request that such enforcement be refused on the grounds set out in

Section 48 of the Act. A party cannot request the Court to refrain from

enforcing an Award, if no such enforcement has been sought. It is

submitted that no petition under Section 48 can be filed as a pre-

emptive step. Therefore, the role of the successful party, the

unsuccessful party and the Court can be summarized as below:

a. Successful Party: To apply for enforcement under Section 47 of the Act which constitutes invocation of the Award.

b. Unsuccessful Party : To resist enforcement by filing an application under Section 48 of the Act in the Enforcement proceedings.

c. Court: To decide the objections filed and determine whether or not the Award should be enforced.

O.M.P. Nos. 223/2006 & 329/2006 Page 8 of 27

19. The respondents submit that Section 46 of the Act begins with

the words "Any foreign award which would be enforceable under this

chapter... ... ....". Consequently, the application of Section 46 is

limited to circumstances where an Award has been held to be

enforceable under Part II of the Act.

20. It is further submitted that the question of when a Foreign Award

is considered to be enforceable under the Act has been addressed in

Section 49 of the Act which states that "where the Court is satisfied

that the Foreign Award is enforceable under this Chapter, the Award

shall deemed to be a decree of that Court".

21. Therefore:

(a) The decision - whether an Award is enforceable or not, is

entirely within the Court's domain;

b) It is only upon such satisfaction being reached by the Court,

that a Foreign Award is enforceable;

c) In order to attain such satisfaction, the Foreign Award must go

through the process envisaged under "this chapter" i.e. Chapter

I of Part II, which includes Sections 44 to 52,at the end of which,

the Court must be satisfied that the Award is enforceable.

22. It is argued that where a Foreign Award is enforceable under

Chapter I of Part II of the Act, the same would be deemed to be a

O.M.P. Nos. 223/2006 & 329/2006 Page 9 of 27 decree of the Court and could be relied upon by way of defence, set off

or otherwise in any legal proceedings in India.

23. Conversely, if a Foreign Award has not gone through the process

envisaged in Sections 47-49, any reliance on such an award would not

have any legal sanctity. Therefore, if a party seeks to rely upon a

Foreign Award in India, such party must produce the Award in terms of

Section 47 by way of a formal application seeking enforcement, which

would amount to invoking the Award.

24. If an unsuccessful party wishes to challenge the Award, as

opposed to resist its enforcement, a party may do so at the seat of the

arbitration, in proceedings equivalent to those under Section 34 of the

Act for Domestic Awards.

25. The counsels for the respondent (Videocon Industries Ltd.) place

reliance on the following cases to support their contention:

(i) Bulk Trading SA v. Dalmia Cement (Bharat Ltd.), 2006 (1)

Arb. L.R. 38 (Delhi), wherein the Court has observed:-

"6 .... But in the case of a foreign award as defined in Section 44 of the said Act, there is no provision for moving an application for setting aside a foreign award. On the Contrary, Section 48 provides conditions for enforcement of foreign award. The scheme, therefore, appears to be that while a domestic award made under Part I (See Section 2(7)of the said Act) may be set aside pursuant to an application under Section 34, there is no provision for such an application in respect of a foreign

O.M.P. Nos. 223/2006 & 329/2006 Page 10 of 27 award falling under Part II of the said Act. A party objecting to the enforceability of a foreign award may do so only when an application for enforcing the same is moved by another party. At that stage,the enforcement of the foreign award may be refused by the Court at the request of the party against whom it is invoked on the conditions set out in Section 48 of the said Act. " (emphasis supplied)

(ii) Goldcrest Exports v. Swissgen N.V. and Anr, 2005 (3) Arb

L.R. 58 (Bombay) (DB), wherein the Court observed:

"19.... Part II in any event provides an opportunity for a party aggrieved by a foreign award to oppose enforcement thereof. It however restricts the circumstances in which such right can be exercised. The scheme of the Act indicates clearly the intent of the legislature to provide a party with a right to challenge a foreign award only in certain circumstances. By necessary implication it excludes the right of a party to challenge a foreign award except in cases where the enforcement thereof is sought. " (emphasis supplied)

(iii) Jindal Drugs Ltd. v. Noy Vallesina Engineering SpA and

others, 2002 (2) Arb L.R. 323 (Bombay), wherein the Court observed:

"8. Insofar as the challenge to a foreign Award is concerned the scheme of the Act appears to be that, the remedy that is available to a person against whom that Award has been made is to wait till the person in whose favour the Award is made moves under Section 48 of the Act for enforcement of the award and it is then that such a person can challenge the validity of the Award on the grounds which are mentioned in Section 48 of the Act." (emphasis supplied)

O.M.P. Nos. 223/2006 & 329/2006 Page 11 of 27

(iv) Vikrant Tyres Ltd. and Anr. v. Techno Export Foreign Trade

Company Ltd. 2005 (Supp) Arb. LR 454 (Karnataka), wherein the

Court observed:

"41 .... However from the scheme of Section 48 it could be said that no application as a pre-emptive step could be filed to resist execution even before any such application for execution of the award is made in that behalf Therefore, the application filed by the Plaintiff under Section 48 is premature and not maintainable." (emphasis supplied)

26. Learned senior counsel for respondent no.1 thus concludes that

an enforcement petition is a pre-requisite, in order to give rise to the

cause of action for filing of an application under Section 48 of the Act

to resist enforcement of a Foreign Award.

Petitioner's submissions:

27. On the other hand, the learned ASG submits that Part II of the

Act deals with 'Enforcement of Certain Foreign Awards'. He submits

that Section 46 is in two parts. The first part provides that any foreign

award which would be enforceable under this chapter shall be treated

as binding and can be relied by way of defence, set off or otherwise in

any legal proceedings in India and the second part provides that

enforcing a foreign award shall be construed as including reference to

relying on an award. In other words 'relying on an award' also

amounts to 'enforcement of a foreign award'.

O.M.P. Nos. 223/2006 & 329/2006 Page 12 of 27

28. He submits that it is possible that an award is enforced without

the intervention of a Court. In such cases also it would amount to

enforcing the Award, notwithstanding the fact that no application is

filed in the Indian Court.

29. It is argued that Section 48 of the Arbitration and Conciliation

Act, 1996 states that: "Enforcement of an foreign award may be

refused, at the request of the party against whom it is invoked.....". In

view of Section 46 of the Act 'Enforcement of a foreign award' as used

in Section 48 would also mean 'relying on the award' in any manner.

Section 48 provides that the Court may refuse to enforce a foreign

award at the request of a party against whom the award is 'invoked',

and not against whom the award is 'enforced'. An award can be

invoked against a party without recourse to any judicial proceedings,

viz. by making the award as a basis and demanding the amount

payable by the unsuccessful party, or by adjusting the money

belonging to the unsuccessful party already in the hands of the

successful party, towards the liability under the award. Sections 59, 60

and 61 of the Contract Act also recognize that a person can

appropriate the amount held by him and belonging to another, owed

by the latter to the former, towards the debt. Order XXI Rule 2 of the

CPC also recognizes the discharge of debt by appropriation or

adjustment of amount already lying with the decree holder.

O.M.P. Nos. 223/2006 & 329/2006 Page 13 of 27

30. Therefore, to read section 48 in a manner to say that

enforcement can be refused only at the request of the party against

whom enforcement/execution proceedings have been initiated in a

Court, would be to add/supply words to the said provision.

31. Meaning of "invoke" is "appeal to as an authority or in support of

an argument" (Oxford Tenth Ed.) and "enforce" means "compel

compliance with (a law, rule or obligation); cause to happen by

necessity or force".

32. Thus the use of the word 'invoke' in section 48 in

contradistinction to "enforce" shows that the Legislature did not intend

the initiation of an enforcement/execution proceeding as a condition

precedent for raising the issue of non-enforceability of a foreign award

by the unsuccessful party.

33. Further, the term "enforcement of award" has been held not to

mean merely execution of that award as a decree, but it also includes

using that award as defence in legal proceedings for claiming set off on

the basis of that award, etc. Execution of the foreign award as decree

is only one facet of enforcement. Thus, enforcement of a foreign award

is a wider term than execution of the award.

O.M.P. Nos. 223/2006 & 329/2006 Page 14 of 27

34. Reliance is placed on Pratabmull Rameshwar Vs. KC.Sethia,

AIR 1960 Cal 702, wherein it was held as under:-

"23. The learned Standing Counsel, on behalf of the respondent, has argued that this main contention of the appellant that the agreement and the awards are against the public policy of India is misconceived. He submits that the words of Section 7 (i) of the Arbitration (Protocol and Convention) Act, 1937, are against this contention. He argued that the expression, "enforcement thereof', in that section means execution of these awards. It is said that the awards in this case only direct the appellant to pay a certain sum of money as damages. As such, on the face of it, it cannot be said that the awards are against any public policy. The difficulty of accepting this argument is the narrow meaning it attributes to the word, "enforcement". Enforcement is not merely the technical part of execution. Enforcement includes the whole process of getting an award as well as its execution. We are, therefore, not prepared to limit the word, "enforcement", in Section 7(i) of the Act to the mere technical part of its execution." (emphasis supplied)

35. Thus, if a foreign award is sought to be relied upon to raise a

demand, it can be said that it is being enforced. In any event, the

award stands invoked in such a situation.

36. Reliance is also placed on Centrotrade Minerals and Metals

Vs. Hindustan Copper Ltd., AIR 2004 Cal 142, wherein a single

Judge of Calcutta High Court has observed as under:-

"9. From the provisions contained in Section 47, 48 and 49 of the Act it is clear that both the parties can approach the appropriates forum with their respective prayers, i.e. the person in whose favour a foreign award goes can definitely apply before the competent Court for enforcement and execution of the award, and at the same time the person

O.M.P. Nos. 223/2006 & 329/2006 Page 15 of 27 against whom the foreign award has gone can approach the Court for setting aside such an award ..."

37. Reliance is placed on ShinEtsu Chemical Co. Ltd. V s. Aksh

Optifibre Ltd, (2005) 7 SCC 234, wherein the Supreme Court held

as under:

"55. I may also deal with the contention urged on behalf of the appellant that only a prima facie finding is required to be given on a combined reading of Sections 45, 48 and 50 from which it can be culled out that a party who has suffered an award can always challenge the same under Section 48 on the ground that the arbitration agreement is null and void. This read in conjunction with the right of appeal given under Section 50 and the power of the arbitrator to rule on his own jurisdiction clearly shows the intent of the legislature to avoid delay which would be inevitable if it has to be a final decision and it would defeat the object of soon placing all material before the Arbitral Tribunal. I am afraid that this cannot be accepted as the real purpose of Section 48 is to ensure that at some stage Whether pre-award, post-award or both, a judicial authority must decide the, validity, operation, capability of performance of the arbitration agreement...." (emphasis supplied)

38. Reliance is also placed on Venture Global Engineering Vs.

Satyam Computers, 2007 (3) RAJ. 128 (AP), wherein it was held

that :

"A conjoint reading of section 36 and 34 reveal that Section 36 deals with the enforcement of the Arbitral Award and Section 34 provides for the recourse for challenging the arbitral award. Whereas Section 48 of the Act, 1996 is a comprehensive provision, dealing with a foreign award, like the present one, which can be invoked for enforcement of the arbitral award or be subjected to challenge by the aggrieved party."

         (emphasis supplied)



O.M.P. Nos. 223/2006 & 329/2006                                 Page 16   of 27

39. Further, it is submitted that even if an award is challenged by a

party outside India and the challenge is rejected, even in that case

under Section 48 of the Act, a second chance is available to a party to

again challenge the said award under Section 48 of the Act.

40. It is submitted that in a situation where the amount under the

foreign award is appropriated or adjusted without intervention of the

Indian Court, if it is held that a petition under section 48 is not

maintainable by the unsuccessful party before the successful party

moves the Court under section 47, then in that case the remedy

provided under the Indian Law under Section 48 would be rendered

redundant. A suit for recovery of money in the case of 'appropriation'

of amount under the Award, without going through the procedure of

Section 47 and 48, would also not be maintainable since same would

be barred by Section 5 of the Arbitration and Conciliation Act.

Therefore, in such a case the petitioner/award debtor would be left

remediless, and therefore an independent petition under Section 48

should be permitted to be maintained. In the present case a demand

letter dated 22.08.2005 was addressed to Govt. of India with copy to

HPCL and others. The demand letter dated 22.08.2005 was based on

the partial award dated 31.03.2005 and as per that award a payment

of Rs.124,427,492/- was demanded from the Govt. It was further stated

in the letter as under:

O.M.P. Nos. 223/2006 & 329/2006 Page 17 of 27 "we further request you to instruct your Nominees, including GAIL, to apply the average of the SBI TT Buy Rate and SBI TT Sell Rate for converting the US Dollar amount into INR equivalent amounts while making payments to the Company with immediate effect. The current practice of GOI Nominees of making payments by applying the SBI TT Buying Rate is not only incorrect and undesirable but also contrary to the Arbitral Award dated 31.03.2005."

41. Thus, the Respondent No.1 is seeking to enforce the Award

against the petitioner. Since, by demand letter dated 22.08.2005 the

award was sought to be enforced (invoked), and the remedy is

provided in section 48 of the Arbitration Act, 1996 therefore, the only

remedy available to the petitioners is to file an application under

Section 48.

Discussion:

42. Part II of the Act is titled „Enforcement of Certain Foreign

Awards‟. Chapter I (Section 44 to 52) of Part II deals with „New York

Convention awards‟. Section 44 defines „foreign award‟, under Chapter

I of Part II of the Act, as an arbitral award made in pursuance of an

arbitration agreement as provided for in clause (a) of Section 44, and

in such territory as provided for in clause (b) of Section 44. Section 45

provides for the „Power of judicial authority to refer parties to

arbitration‟ in respect of an arbitration agreement referred to in

Section 44. Section 46 to Section 49 deal with Enforcement of the

foreign awards under Chapter I of Part II of the Act.

O.M.P. Nos. 223/2006 & 329/2006 Page 18 of 27

43. The first part of Section 46 provides for the effect of a foreign

award which would be enforceable under chapter I- by stating that the

same shall be binding for all purposes on the persons as between

whom it was made. The Second part of Section 46 provides for the

manner in which such a foreign award may be relied upon. It states

that the same may be relied upon by persons by way of defence, set

off or otherwise in any legal proceedings. The later part of Section 46

provides for the manner in which, references to enforcing an award

under Chapter I, are to be construed or, in other words, are to be read

or interpreted. It states that the same shall be construed as including

references to relying on an award. This means that when an award is

relied upon by way of defence, set off or otherwise in any legal

proceedings, it shall be construed as enforcing the award under this

chapter. Therefore, in case an award-debtor initiates certain legal

proceedings against the award-holder, and the award-holder relies

upon the award by way of defence, set off or otherwise (before pro-

actively getting it enforced before the Court in execution proceedings),

the award-holder would be obliged to comply with the requirements of

Section 47 (which prescribes the „evidence‟ to be produced by the

award-holder) without which the Court would not entertain the defence

based on the foreign award. If the award-holder produces the

evidence to enforce the award, i.e. to permit it to be treated as a valid

O.M.P. Nos. 223/2006 & 329/2006 Page 19 of 27 defence, set-off etc., it shall be open to the plaintiff/award-debtor to

oppose the enforcement by furnishing the proof in terms of Section 48

of the Act. Therefore, to save multiple proceedings and to promote the

objective of the Act,- which is to provide an alternate expeditious and

efficacious remedy to the parties and limit the intervention of the

Courts in matters of arbitration, the legislature in its wisdom has

expanded the scope of the expression "enforcement" of an award

under this chapter as not only meaning the making of a formal

application for execution by the award-holder, but also to include

reliance by the parties by way of defence, set off or otherwise in any

legal proceedings.

44. In the light of the above, the argument of the petitioner founded

upon Section 5 of the Act appears to be misplaced. Even otherwise,

Section 5 falls in Part I and Section 5, in terms, applies in respect of

matters governed by Part I. Enforcement of foreign awards, on the

other hand, falls in Part II. Therefore, Section 5 would not come in the

way of an award-debtor to initiate legal action or proceedings in

respect of the subject matter forming part of a foreign award.

However, such an action/proceedings may at the behest of the

opposite party be short circuited, if launched before the making of an

arbitral award - by resort to Section 45. If a foreign award has already

been rendered, the opposite party would be entitled to enforce the

O.M.P. Nos. 223/2006 & 329/2006 Page 20 of 27 award, inter alia, by relying upon the same by way of a defence, set off

or otherwise, by following the procedure prescribed under Section 47

of the Act. Such enforcement may then be opposed by the

plaintiff/award debtor by producing evidence under Section 48 of the

Act.

45. Chapter I of Part II the Act deals, firstly, with the definition of

„foreign awards‟; secondly, with the power of the judicial authority to

refer the parties to arbitration, and; thirdly, with the enforcement of

foreign awards.

46. A comparative analysis of the provisions of Part I and Part II of

the Act reveals that request for refusal of enforcement of an award as

provided for in Section 48, cannot be equated to, and is different from,

an independent remedy for seeking recourse against an award (as

provided for in Section 34). Firstly, Chapter VII of Part I of the Act

(wherein Section 34 falls), bears the heading „Recourse against Arbitral

Award‟. There is no corresponding Chapter provided for in Part II of the

Act. There is no recourse against a foreign award in an Indian Court

under Part II of the Act. Secondly, Chapter VIII of Part I of the Act

relates to „Finality and Enforcement of Arbitral Awards‟. Part II of the

Act (dealing with foreign awards) deals with „Enforcement of Certain

Foreign Awards‟. So, it could be said that Chapter VIII of Part I and Part

O.M.P. Nos. 223/2006 & 329/2006 Page 21 of 27 II of the Act are corresponding/analogous to each other; but it cannot

be said that Chapter VII of Part I of the Act (dealing with recourse

against arbitral award) is analogous to Part II. Thirdly, in Section 36 (in

Chapter VIII of Part I of the Act), there is a reference to an application

for recourse against arbitral award under Section 34. However, there is

no reference to such an application in Section 49 (provided for in Part II

of the Act), which deals with enforcement.

47. Pertinently, Section 34 prescribes a mandatory period of

limitation to challenge the domestic award. However, there is no

limitation prescribed for moving an application under Section 48. This

also shows that, whereas, a proceeding under Section 34 is required to

be launched - to assail the award within the statutory period of

limitation - else it cannot be assailed, a proceeding under Section 48

can only be initiated once its enforcement (as widely understood in

Section 46) is sought. Whereas Section 34 proceedings are proactive

proceedings, Section 48 proceedings are only responsive in nature.

Whereas Section 34 proceeding are like a sword-to challenge the

award to have it set aside, Section 48 proceeding are only like a shield

against a foreign award. This means that even if a proceeding under

Section 48 of the Act, i.e. to resist the enforcement of a foreign award

succeeds, it does not amount to the setting aside of the foreign award.

It only means that the enforcement of the foreign award may not take

O.M.P. Nos. 223/2006 & 329/2006 Page 22 of 27 place within the Indian territory, through the process of an Indian

Court. Since Part II does not provide for "recourse against a foreign

award" i.e. to seek the setting aside of a foreign award, to read the

right to assail the foreign award into the Act, would be to go against

the express words of the Act and against the principles of statutory

interpretation.

48. A careful perusal of Section 48 itself would reveal that an

application to assail a foreign award i.e. to seek setting aside or

suspension of the foreign award, is independent of the said provision.

Section 48 (1)(e) provides that enforcement of a foreign award may be

refused, at the request of the party against whom it is invoked, only if

the party furnishes proof that - "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 the under the

law of which, that award was made". Further, Section 48(3) states

that 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. Therefore, Section 48 in itself

contemplates the initiation of independent proceedings for assailing

O.M.P. Nos. 223/2006 & 329/2006 Page 23 of 27 the foreign award before the competent Court/authority of the country

where the award was made, or under the law of which, the award was

made. A proceeding under Section 48 of the Act cannot be converted

into one to assail the foreign award, i.e. to seek the setting aside of the

foreign award.

49. The decision of the Supreme Court in Shin-Etsu Chemical Co.

Ltd. (Supra), relied upon by the petitioners, dealt with an entirely

different issue. The question for consideration before the Court was of

the nature of adjudication that is contemplated by Section 45 when the

question about the arbitration agreement being "null and void,

inoperative or incapable of being performed" is raised before a judicial

authority. It was in this context that Y.K. Sabharwal, J. (in his dissenting

view), took note of, and rejected the contention of the appellant in Para

55 of his Judgment, as aforementioned, and observed that a Judicial

authority under Section 48 must decide the validity, operation,

capability of performance of the arbitration agreement. The Supreme

Court in this case was not considering the issue arising before me. The

issue before the Supreme Court was not whether a petition under

Section 48 of the Act could be filed even when no enforcement

proceedings, as understood in Section 46 of the Act, had been initiated

by one of the parties to the foreign award. I find it difficult to

O.M.P. Nos. 223/2006 & 329/2006 Page 24 of 27 comprehend as to how the said observation renders support to the

petitioner‟s case.

50. The decision in Ventura Global Engineering (supra) has no

application in the facts of this case. That was a case where

enforcement proceedings had already been initiated in a foreign court

prior to the filing of a Civil Suit in the Indian Court. The Andhra

Pradesh High Court held that since the plaintiff had already invoked

the remedy of challenging the enforcement of the award in the foreign

court, the civil suit was not maintainable. In any event, this judgment

has been set aside by the Supreme Court, though on a different

consideration, in the decision reported as Venture Global

Engineering v. Satyam Computer Services Ltd. & Anr., (2008) 4

SCC 190.

51. The decision in Pratabmull Rameshwar (supra) also has no

relevance. In this case, the expression enforcement as used in Section

7(i) of the Arbitration (Protocol and Convention) Act, 1937 was

interpreted by the Calcutta High Court in a wider sense to include the

process of getting an award as well as its execution. The present case

concerns the Act which has a different legislative scheme altogether.

Moreover, I find myself in respectful disagreement with the view of the

Calcutta High Court that "enforcement" would include the whole

process of getting the award. There is no question of the process of

O.M.P. Nos. 223/2006 & 329/2006 Page 25 of 27 getting an award being considered as a process of "enforcement".

"Enforcement" is of an award. It is not the enforcement of legal rights

that was being discussed in Section 7(i) of the Arbitration (Protocol and

Convention) Act, 1937. Unless the award comes into being, I fail to

understand where is the question of its enforcement. The said decision

of the Calcutta High Court, therefore, is of no avail to the petitioner.

52. The decision in Centrotrade Minerals and Metals (supra) of

the Calcutta High Court, with respect, does not lay down the correct

legal proposition in my view in so far as it holds "at the same time the

person against whom the foreign award has gone could approach the

Court for setting aside such an award". I see no reason to disagree

with the view taken by a co-ordinate Bench of this Court in Bulk

Trading SA (supra), the Bombay High Court in Jindal Drugs

Ltd.(supra), and by the Karnataka High Court in Vikrant Tyres Ltd.

(supra) in so far as they holds that an independent proceeding under

Section 48 of the Act cannot be maintained, unless the foreign award is

sought to be enforced in legal proceedings.

53. The submission based on a distinction sought to be drawn

between the expressions "enforced" and "invoked", in my view,

tantamounts to a resort to hairsplitting. Invocation of the award, in the

context of the Act only means the act of seeking its enforcement - as

defined in the wider sense in the Act.

O.M.P. Nos. 223/2006 & 329/2006 Page 26 of 27

54. For all the aforesaid reasons, I hold that the present petitions are

not maintainable at this stage, since the respondent, Videocon

Industries Ltd., has not initiated any enforcement proceedings in

respect of the foreign award.

55. The petitions are accordingly dismissed as not maintainable,

while allowing the preliminary objection of the respondents.

56. Parties are left to bear their respective costs.

                                                              (VIPIN SANGHI)
                                                                    JUDGE
JULY        13, 2012
Sr/'BSR'




O.M.P. Nos. 223/2006 & 329/2006                                     Page 27   of 27