Delhi High Court
Nuovopignone International Srl vs Cargo Motors Private Limited & ... on 30 May, 2023
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Order reserved on: 21 March 2023
Order pronounced on: 30 May 2023
+ O.M.P.(EFA)(COMM.) 11/2021
NUOVOPIGNONE INTERNATIONAL SRL
..... Decree Holder
Through: Mr. Jayant Mehta, Sr. Adv.
with Mr. Abhijnan Jha, Ms.
Bhagya Yadav, Ms. Sadhvi
Chhabra and Mr. Srikar, Advs.
versus
CARGO MOTORS PRIVATE LIMITED & ANR.
..... Judgement Debtors
Through: Mr.Varun K. Chopra, Mr. R.V.
Prabhat, Ms. Mehul Sharma,
Mr. Dipu Kumar Jha, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
ORDER
EX. APPL. (OS) 3525/2022 (Direction)
1. The Court by means of the present order proceeds to dispose of
the objections which have been preferred by the respondents in the
present enforcement petition. The petition itself has come to be
preferred for enforcement of a Foreign Consent Award dated 05
October 2020 in ICC Arbitration No. 24918/GR1. The enforcement
is opposed by the respondents who in terms of Section 48 of the
1 Award
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Arbitration and Conciliation Act, 19962 contend that the Award
having been passed upon consent is not one which is enforceable
under the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards3. It is additionally contended that since the
Award itself is an outcome of economic duress and therefore contrary
to public policy of India, it should not be recognised as being capable
of being enforced under the 1996 Act. For the purposes of adjudging
the objections which have been raised, the following essential facts
may be noticed.
2. The enforcement petitioner and respondent no. 2 entered into an
Equipment Purchase Agreement4 for the sale of Steam Turbine
Generator Package for a consideration of 6.7 million Euros which
roughly translates to INR 60 crores. The respondent no. 1 executed a
Parent Company Guarantee5 in favour of the enforcement petitioner
and stood in the position of a guarantor for the second respondent
which was its subsidiary. The EPA is stated to have been amended to
include additional services to be provided by the petitioner to
respondent no. 2 for a consideration of 1,082,140 Euros [INR 9.52
crores approximately].
3. Consequent to disputes having arisen between parties and on a
failure on the part of the respondents to make payments in respect of
the goods which formed part of the EPA, the enforcement petitioner
the 1996 Act
New York Convention/Convention
EPA
PCG
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submitted a request for referral of all disputes to arbitration as
contemplated under Clause 26.2 of the EPA. The proceedings which
ensued before the Arbitral Tribunal may be gathered from the ultimate
Award which came to be rendered. The Arbitral Tribunal records that
the request for arbitration was received by the ICC International
Court of Arbitration6, on 22 November 2019. The ICC Secretariat
acknowledged receipt of that request on 25 November 2019. On 15
February 2020, counsel for the respondents confirmed to the ICC
Secretariat that they have been duly engaged to represent them in the
matter and also enclosed their letters of authority.
4. In terms of a communication of 18 February 2020, the ICC
Secretariat called upon the respondents to provide their comments on
the constitution of the Arbitral Tribunal. In terms of their
communication of 19 February 2020, the respondents agreed to the
appointment of a sole arbitrator and requested ICC to proceed further.
On 26 March 2020, parties were informed that appropriate steps were
being taken for the appointment of a sole arbitrator and were also
apprised of the costs payable in advance. The appointment of the sole
arbitrator was communicated to parties on 17 April 2020 whereafter
the records were transmitted to the named arbitrator.
5. On 23 April 2020, the Arbitral Tribunal circulated a draft of the
Terms of Reference to the parties as well as the procedural time frame
and directions for inviting their comments. The Statement of Claim
ICC
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together with its exhibits came to be filed on 22 May 2020. The
respondents served their Statement of Defence together with exhibits
on 13 July 2020. By an email of 17 August 2020, the Arbitral Tribunal
was informed by the claimant/enforcement petitioner that parties had
settled the matters in dispute. Consequently, the Tribunal proceeded
to forward a draft consent award to the parties for their review and
comments on 20 August 2020.
6. Both the respondents as well as the claimant are stated to have
provided their comments vide emails dated 01 September 2020 and 04
September 2020 respectively. The Tribunal specifically records that
the respondents had not raised any objection to the request made by
the claimant that a duly authenticated copy of the Settlement
Agreement dated 13.08.20207 be included and made part of the
consent Award. The Arbitral Tribunal also records that until 19 June
2020 the respondents were represented by a set of counsels whose
particulars are recorded in paragraph 12 of the Award. However, by
an email of 19 June 2020, a partner in Khaitan & Co. apprised the
Arbitral Tribunal of the change in representation. In view of the
aforesaid, the Tribunal issued revised Terms of Reference recording
that change on 23 June 2020 and those revised terms were duly signed
by the enforcement petitioner on 26 June 2020 and the respondents on
29 June 2020.
Settlement Agreement
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7. The Tribunal consequently proceeded to draw up the consent
Award in the following terms: -
―48. By this Award by Consent:
a. All claims made in the arbitration are withdrawn on the
terms set out in the Settlement Agreement made between
the Claimant, the First Respondent and the Second
Respondent and dated 13 August 2020, a copy of which is
annexed hereto and initialled by the Tribunal ("the
Settlement Agreement").
b. The Tribunal gives to the Settlement Agreement the
force of an award and orders and directs that the parties
thereto comply with its terms.
c. Each party shall bear its own costs incurred in
connection with the Arbitration.
d. The ICC costs and arbitrator's fees as determined by the
Court shall be paid from the Advance on Costs. Any
balance remaining shall be returned to the Claimant.
e. The parties shall remain jointly and severally liable for
payment of VAT on the arbitrators's fees pursuant to
Appendix III Article 2(13) of the ICC Rules.‖
8. For the sake of completeness of the record, the Court also
deems it apposite to extract the following salient provisions of the
Settlement Agreement: -
―2.1 The Parties hereby acknowledge that Cargo Solar owes
€1.587.140 under the EPA and Contract Amendment and
€400.000 as storage and preservation costs ("Outstanding
Amount'').
2.2 Cargo Solar shall pay €1.3 million ("Settlement Amount‖)
pursuant to the following schedule:
Schedule Date of Payment Amount
Milestone 1 7 September 2020 €337,250
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Milestone 2 7 December 2020 €337,250
Milestone 3 7 March 2020 €312,750
Milestone 4 7 June 2021 €312,750
€1,300,000
2.4 If Cargo Solar pays the Settlement Amount pursuant to this
Clause 2, NP shall concede its entitlement to the remaining €
287,140 under the EPA and Contract Amendment and €400,000
as storage and preservation costs of the Outstanding Amount.
Upon payment of the Outstanding Amount as per the schedule
under Clause 2.2. Cargo Solar and Cargo Motor would be deemed
to have duly performed their obligations under this Settlement
Agreement and NP shall deliver the STG Package to Cargo as per
Clause 3 below.
3.1 NP shall:
(a) store and preserve the STG Package at no
additional charge until 30 June 2021; and
(b) deliver the STG Package pursuant to Clause
9 and Annexure I of the EPA, which are
hereby incorporated mutatis mutandis into
this Settlement Agreement.
3.2 Cargo Solar shall arrange for pick-up and FOB delivery of
the STG Package by 30 June 2021 pursuant to Clause 11
of the EPA, which is hereby incorporated mutatis
mutandis into this Settlement Agreement.
6.2 For the avoidance of doubt.
(a) any delay in Cargo Solar's performance shall
not extend, delay, or otherwise affect the
Dates of Payment set out in the payment
schedule at Clause 2 above; and
(b) Clause 6.1 entitles Cargo Solar to a total of
45 (forty-five) calendar days to remedy all
breaches that may arise during the course of
this Settlement Agreement, Clause 6.1 does
not grant Cargo Solar a period of 45 (forty
five) calendar days for each instance of non-
performance.
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6.3 If Cargo Solar does not remedy its non-performance in
accordance with this Clause 6, then:
(a) the entire Outstanding Amount (less any
amount already paid under the Settlement
Agreement) shall become immediately due
and payable, including any interest thereon;
(b) NP may dispose the STG Package as
necessary, within 9 (nine) months from the
date of such non-performance or on 30 June
2022, whichever is earlier; and
(c) NP may obtain a Consent Order as set out in
Appendix A to enforce the terms of this
Settlement Agreement in the local courts of
appropriate jurisdiction as necessary, and if
required.
6.4 Cargo Solar's obligations under this Settlement Agreement
shall not be discharged, delayed, excused or otherwise
affected by:
(a) any force majeure event arising under the
governing law of this Settlement Agreement;
(b) any reorganisation or alteration of the status of
Cargo Solar and/or Cargo Motors;
(c) the insolvency, bankruptcy, winding up,
liquidation, or dissolution of Cargo Solar and/or
Cargo Motors, their undertakings, and/or their
assets;
(d) the appointment of a receiver, administrator,
trustee or similar officer of Cargo Solar and/or
Cargo Motors, their undertakings, and/or their
assets;
(e) any act, omission, event, or circumstances which
(apart from this provision) would or might
constitute a legal or equitable defence for or
discharge of a surety or guarantor; or
(f) or any other analogous event.
7.1 Cargo Motors' liabilities and obligations shall be subject
to the terms of the PCG, which is hereby incorporated
mutatis mutandis into this settlement agreement.
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11.2 Upon jointly requesting that this Settlement Agreement be
incorporated into an arbitral award, the Parties represent
that they:
(a) have received independent legal advice on
this matter including independent legal
advice on Indian law. On that basis, the
Parties further acknowledge that the arbitral
award is enforceable on its terms in an Indian
court. The Parties further agree that there are
no grounds for refusal to enforcement of the
award whether under Section 48 of the
(Indian) Arbitration & Conciliation Act,
1996 or under any other law. Cargo Solar
and Cargo Motors undertake to pay on the
award without demur immediately on the
receipt of a copy of the award and without
requiring any enforcement action; and
(b) without derogating from the obligation of
Cargo Solar and Cargo Motors to pay on the
award without demur, NP shall be entitled to
approach the competent jurisdictional court
in India for recognition and enforcement of
this award. NP shall approach the court with
prior notice to Cargo Solar and Cargo
Motors. Cargo Solar and Cargo Motors shall
promptly enter appearance in the matter and
concede to recognition and enforcement of
the award without citing any defence.
15.1 This Settlement Agreement sets out the entire agreement
between the Parties in relation to settlement of the
Arbitration.
15.2 Each party has participated in the drafting and negotiation
of this Settlement Agreement. Accordingly, this
Settlement Agreement shall be deemed to have been
drafted jointly by the Parties which mutually declare that
the contractual provisions represent in all expression of
their true will.‖
9. The present enforcement petition has been filed before this
Court alleging non-compliance on the part of the respondents to make
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over the Settlement Amount as envisioned under the Settlement
Agreement. The enforcement petitioner contends that the respondents
are liable to pay the aggregate Outstanding Amount and has sought
enforcement of the Award.
10. The respondents firstly object to the recognition of the Award
contending that since it was one which was rendered on consent, it
would not fall within the scope of awards as recognised under the
Convention. It was the aforesaid objection which was principally
urged by learned counsel before this Court. It was submitted that the
New York Convention pertains to recognition and enforcement of
awards "arising out of differences between persons". It was submitted
that since the New York Convention does not contemplate awards
rendered upon settlement, the enforcement action would not sustain.
Learned counsel had also referred to some of the preparatory material
which preceded the formalisation of the New York Convention to
submit that various nations had made specific requests for awards by
consent and settlement being included. However, it was contended
that when the New York Convention ultimately came to be
promulgated, settlement awards were not explicitly included.
According to learned counsel, this circumstance would clearly suggest
that settlement awards are not covered under the Convention. The
aforesaid submission proceeds on the basis of certain representations
made by and on behalf of the erstwhile Federal Republic of Germany
as well as by Austria. This would be evident from the extracts of their
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representations as included in the Report of the Secretary General
dated 31 January 19568. The relevant parts of that report are
reproduced hereinbelow: -
―Federal Republic of Germany
"Consideration should also be given to the idea of extending the
scope of the Convention to cover, in addition to awards,
settlements reached before arbitral tribunals. At the time when
the Geneva Convention was drafted it was decided not to
include provisions relating to such settlements; the absence of
such a provision has often proved a regrettable omission in
practice. It is proper, therefore, to suggest that this gap should
now be closed."
Austria
"The convention should perhaps be expanded to include arbitral
settlements. There would have to be an express provision to that
effect; this would be in keeping with Austrian practice
(paragraph 1, line 16 of the rules governing the enforcement of
judicial decisions). Because the opportunities for testing the
validity of decisions are adequate and the grounds for refusing
enforcement offer sufficient protection, there should be no
objection to such a provision.‖
11. The submission essentially was that since a request for the
expansion of the terms of the New York Convention to include
arbitral settlements never came to be specifically incorporated,
consent awards must be understood as falling beyond the scope and
ambit of the New York Convention.
12. Insofar as the issue of economic duress is concerned, it was the
submission of learned counsel that the settlement terms were hurriedly
pushed through by the enforcement petitioner during the period when
the pandemic had gripped the entire world and had adversely impacted
E/2822
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the respondents from seeking appropriate legal opinion. It was also
submitted that the respondents were coerced to agree to the consent
terms even though a reading of the Settlement Agreement would
establish that it is clearly designed to operate solely in favour of the
enforcement petitioner.
13. The aforenoted submissions were controverted by Mr. Jayant
Mehta, learned senior counsel who appeared for the enforcement
petitioner and addressed the following submissions. Mr. Mehta
contended that the Convention does not define "awards" at all.
According to learned senior counsel, merely because the
representations of the Federal Republic of Germany and Austria did
not ultimately translate into specific provisions with respect to
settlements being incorporated in the Convention, the same cannot
lead one to conclude that awards on settlement would not be
enforceable thereunder.
14. Mr. Mehta submitted that the objection that foreign consent
awards cannot be enforced or are not recognised is a submission
which came to be directly negatived by the Supreme Court in
Harendra H. Mehta v. Mukesh H. Mehta9. It was pointed out that
although the aforesaid decision was rendered in the context of the
Foreign Awards (Regulation and Enforcement) Act, 1961, the
principles laid down therein would clearly apply. Mr. Mehta referred
(1999) 5 SCC 108
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to paragraphs 22 and 23 of the report which are extracted
hereinbelow: -
"22. We do not understand as to how it could be said that the
award was not a foreign award. All the ingredients of a foreign
award were there. The parties were having business both in
India and in the United States of America as a joint venture and
they also acquired properties. Differences that arose between the
parties were out of legal relationships and certainly of
commercial nature under the laws of this country. Agreement to
refer the disputes to arbitration, in writing, was made in the
United States where arbitration proceedings were held and
award given. It is not disputed that the United States is a country
to which clause (b) of Section 2 of the Foreign Awards Act
applies. In the present case, the parties are no doubt related to
each other but that could not take the award outside the ambit of
the Foreign Awards Act. We asked Mr Ganesh as to what would
happen if there were two strangers having businesses both in
India and in the United States or when there was a joint venture
between an Indian and a US national having properties both
moveable and immovable in both the countries and disputes
having arisen and award given in the United States. Mr Ganesh,
in spite of his resourcefulness, was unable to give any
convincing reply. There is no merit in the objection of the
appellant that the award is not a foreign award and that it is
outside the Foreign Awards Act.
23. That the award is not an arbitral award, the submission of
Mr Ganesh was that the arbitration agreement which was
entered into on 17-11-1989 stood revoked after the parties
arrived at the settlement agreement dated 20-3-1990. Earlier
agreement dated 25-10-1989 to refer the disputes to arbitration
stood superseded by the agreement dated 17-11-1989. Mr
Ganesh read in detail the terms of the settlement agreement to
contend that the parties themselves had resolved their disputes
and that the agreement was to take effect irrespective of the fact
whether the arbitrator gave his award in terms thereof or not. He
said that the arbitrator was to act merely as a rubber stamp after
the parties had opted for various packages containing their
businesses and properties. The submission in brief was that
unless there was a dispute or difference, there could be no
arbitration. The arbitrator was not only not required to act
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judicially after the agreement dated 17-11-1989 had been
arrived at between the parties but, in fact, he was prevented from
acting judicially and giving any decision whatsoever affecting
the rights of the parties. He was not expected to hear or apply
his mind or perform any of the arbitration functions. In such a
situation, even though there was in existence an arbitration
agreement that stood revoked for one basic and simple reason
that at that time there existed no dispute. The agreement was
straightaway made into the award. In support of his submissions,
Mr Ganesh referred to a decision of this Court in K.K.
Modi v. K.N. Modi [(1998) 3 SCC 573] to contend that when a
person has been authorised to decide a certain dispute between
the parties but he has no function to perform as arbitrator, he
could not give an award. But in that case, under clause (9) of the
Memorandum of Understanding between the parties there were
different contentions: one contending that the clause constituted
arbitration agreement, the other contending to the contrary. This
clause (9) was as follows: (SCC p. 580, para 3)
―Implementation will be done in consultation with the
financial institutions. For all disputes, clarifications etc. in
respect of implementation of this agreement, the same
shall be referred to the Chairman, IFCI or his nominees
whose decisions will be final and binding on both the
groups.‖
It was in this context that this Court said that looking at the
nature of the functions expected to be performed by the
Chairman, IFCI, his decision is not an arbitration award. This
judgment hardly helps Mr Ganesh in his submissions. In the
present case, the parties entered into the settlement during
pendency of the arbitration proceedings. The appellant himself
approached the courts in the United States never complaining
that it was not an award. In proceedings under CPLR 7507 and
CPLR 7510, Harendra had even accepted the execution of the
settlement agreement and the award made by the arbitrator. We
find that no such plea was taken either in the High Court or in
the grounds of appeal to this Court. The Nassau County Court
noticed the functions to be performed by the arbitrator in the
settlement agreement. We do not find any merit in the argument
of Mr Ganesh that the arbitration agreement stood revoked when
the parties during the course of arbitration proceedings entered
into a settlement among themselves and yet wanted the
arbitrator to give his award in terms thereof. It is nobody's case
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that the authority of the arbitrator was revoked at any time. This
argument of Mr Ganesh seems to us to be made in mere
desperation.
15. Mr. Mehta then drew the attention of the Court to the judgment
rendered by the United States District Court for the Southern District
of New York in Albtelecom SH.A v. UNIFI Communs., Inc.10 as
well as of the United States District Court for the Southern District of
Texas in Transocean Offshore Gulf of Guinea VII Ltd. v. Erin
Energy Corp.11 to contend that courts in the United States itself have
rejected identical pleas. Taking the Court through the decision in
Albtelecom, Mr. Mehta submitted that the District Court was
considering a petition for confirmation of a foreign arbitration award
which had incorporated the terms of settlement arrived at between
parties during the course of arbitral proceedings. The respondent
before that court had taken the objection that the Convention would
not apply since the award took the form of a consent award. Mr.
Mehta submitted that the said objection came to be negatived in
unequivocal terms as would be evident from the following extracts of
that decision: -
"B. Analysis
Albtelecom first asks the Court to confirm the Award. Based on
its review of the Award and the parties' submissions, and having
undertaken the limited review appropriate here, the Court agrees
that there is no material issue of fact for trial as to confirmation,
and that the Award was properly entered. The face of the Award
reflects full participation by both parties in the arbitration
process, which had proceeded for more than three years as of the
2017 U.S. Dist. LEXIS 82154
2018 U.S. Dist. LEXIS 39494
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date on which the Award was entered. The Award reflects
consent to the terms and the text of the Award, by both parties.
It reflects due care by arbitrator Knoll. And the parties' consent
to the Award--their stipulation to its terms--provides a sound
basis for its entry.
Unifi's sole argument against confirmation is that the Award was
entered into by consent of the parties, as opposed to being based
on an arbitrator's resolution of the factual and legal disputes.
Unifi claims that "the parties agreed to settle their dispute
outside of arbitration." Unifi Mem. at 13. But that is wrong. The
parties here certainly could have dismissed the arbitration in
favor of a private settlement agreement.
Instead, as the record reviewed above reflects, they affirmatively
asked arbitrator Knoll to adopt as part of an ICC arbitral Award,
in haec verba, the terms of their settlement agreement in the
Award. The parties then proceeded, with the arbitrator's consent,
to edit the draft Award, to assure that it reflected their
agreement. Far from being resolved "outside of arbitration," the
parties' dispute, therefore, was ultimately resolved in arbitration,
based on the parties' stipulation to particular terms as embodied
in the Award.
Unifi cites no law to the effect that an Award entered into by an
ICC arbitrator, mid-arbitration, with the parties' consent and
based on terms agreed to by the parties, is any less binding
under the New York Convention than an ICC award entered into
after more contentious litigation. There is no reason for such an
exception. On the contrary, the opposite rule would discourage
resolution of disputes in mid-arbitration. Parties who initiate
arbitration under the ICC might be less willing to settle, were
the implication of a settlement that the resulting Award would
lose its enforceability under the New York Convention. There is
indeed limited law on this point, presumably because Awards
achieved following the parties' consent are less likely to result in
later disputes. But the limited available precedents reflect
recognition and enforcement of Awards entered into based on
stipulations by the parties. See, e.g., United States v. Sperry
Corp., 493 U.S. 52, 56- 57, 110 S. Ct. 387, 107 L. Ed. 2d 290
(1989); Bakers Union Factory, #326 v. ITT Continental Baking
Co., Inc., 749 F.2d 350, 354 (6th Cir. 1984); Bruce Hardwood
Floors v. S. Council of Indus. Workers, 8 F.3d 1104, 1107 (6th
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Cir. 1993); Voss Steel Employees Union v. Voss Steel Corp., 797
F. Supp. 585, 590 (E.D. Mich. 1992), aff'd, 16 F.3d 1223 (6th
Cir. 1994).
The Court therefore will confirm the arbitral Award. The Court
will order entry of judgment as provided in the Award, to wit,
that Unifi was required, as of September 2, 2015, to make the 39
monthly installment payments totally EUR 1,088,000, in the
amounts and on the dates indicated in the Award, and to comply
with the other obligations reflected in the Award.‖
16. It was further submitted by Mr. Mehta that the position in law
as expounded in Albtelecom came to be reiterated in Transocean.
Learned senior counsel referred to the following passages from the
aforenoted decision: -
―Erin Energy's only argument against confirming the arbitral
award is that it is a "consent award" and therefore not subject to
the Convention. Erin Energy concludes that the petition must be
dismissed because the court lacks subject-matter jurisdiction.
(Docket Entry No. 28). In lieu of citing case law, Erin Energy
cites the 2016 United Nations Commission on International
Trade Law Secretariat Guide on the Convention, which states
that neither the Convention nor reported case law specifically
address consent awards. Id. at 2. That is no longer the case.
In 2017, in a case with analogous facts and legal issues, the
Southern District of New York held that an award "entered into
by consent of the parties, as opposed to being based on an
arbitrator's resolution of the factual and legal disputes," covered
by and subject to the Convention. Albtelecom SH.A v. UNIFI
Commc'ns, Inc., 2017 U.S. Dist. LEXIS 82154, 2017 WL
2364365, at *5 (S.D.N.Y. May 30, 2017). The petitioner in
Albtelecom sought confirmation of an arbitral award decided by
an arbitrator of the International Chamber of Commerce's
International Court of Arbitration. The award was based on the
parties' consent. 2017 U.S. Dist. LEXIS 82154, [WL] at *1. The
respondent's "sole argument" against confirmation was that the
award was made by the parties' consent, which the respondent
asserted showed that the parties had resolved their dispute
"outside of arbitration." 2017 U.S. Dist. LEXIS 82154, [WL] at
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*5. The Albtelecom court disagreed for two reasons. First,
though the parties could have dismissed the arbitration to pursue
a private settlement agreement, they instead "affirmatively asked
[the arbitrator] to adopt as part of an . . . arbitral Award, in haec
verba, the terms of their settlement agreement in the Award." Id.
Second, the respondent cited no case law to support treating a
consent award as outside the Convention, or entitled to less
preclusiveness or enforceability, than an award entered through
an adjudicative proceeding by the tribunal, even if the parties do
not agree with the outcome. Id. As the court explained:
There is no reason for such an exception. On the
contrary, the opposite rule would discourage resolution
of disputes in mid-arbitration. Parties who initiate
arbitration under the [arbitral court] might be less willing
to settle, were the implication of a settlement that the
resulting Award would lose its enforceability under the
New York Convention. There is indeed limited law on
this point, presumably because Awards achieved
following the parties' consent are less likely to result in
later disputes. But the limited available precedents reflect
recognition and enforcement of Awards entered into
based on stipulations by the parties.
Id.
The analysis in Albtelecom is thorough and persuasive. This
court reaches a similar result. The parties in this case did not
dismiss the arbitration. Rather, they opted to continue the
arbitration proceedings even after they came to their own
agreement. While the tribunal did not make findings or reach
legal conclusions, it made an award that bound the parties,
within its power. (Docket Entry No. 25-1 at 7-9). No binding or
persuasive statutory language or case law requires a court to
hold that a tribunal must reach its own conclusions, separate
from the parties' agreement, to make a valid, binding award
subject to the Convention. As the Albtelecom court noted, this
rule would dissuade parties from seeking arbitration in the first
place or benefitting from the efficiencies it is meant to provide.
Erin Energy cites the London Court of International Arbitration
rules, but they hurt, not help, its argument. Rule 26.2 states that
"any award" made by the tribunal must be in writing "and,
unless all parties agree in writing otherwise, shall state the
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reasons upon which such award is based." (Docket Entry No. 28
at 3 (emphasis added)). Rule 26.9 states that a consent award
"need not contain reasons." Id. Erin Energy argues that an
"award" cannot be a consent award because Rule 26.2 requires
any award to contain reasons and Rule 26.9 permits consent
awards without reasons. But Erin Energy ignores the
punctuation in Rule 26.2 and the text of Rule 26.9. "Unless all
parties agree in writing otherwise" in Rule 26.2 refers to consent
awards, confirmed by the procedure in Rule 29.2. "In the event
of any final settlement of the parties' dispute, the Arbitral
Tribunal may decide to make an award recording the settlement
if the parties jointly so request in writing . . . ." Id. (emphasis
added). Rule 26.2, in other words, states that all awards, except
for consent awards, must state the reasons the award is based on.
The rules make no distinction between consent awards and other
arbitral awards.
Because the consent award made by the London Court of
International Arbitration is subject to the Convention, this court
has subject-matter jurisdiction under 9 U.S.C. § 203 to confirm
the arbitral awards in this case.‖
17. It was then contended that the objection based on economic
duress is not only misconceived but clearly contrary to the record
itself. Mr. Mehta submitted that, undisputedly, the respondents were
duly represented by counsels at all stages of the proceedings before
the Arbitral Tribunal. It was also contended that the Arbitral Tribunal
had itself and upon the receipt of the Settlement Agreement circulated
a draft award for the consideration of parties and in response to which
the respondents did not raise any objection at any stage. The attention
of the Court was also drawn to the specific recitals appearing in the
Settlement Agreement itself and which in Clause 11.2 states that
parties had clearly and in unequivocal terms consented to the
Settlement Agreement being incorporated into an Arbitral Award. It
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was also pointed out that Clause 11.2(a) further records that parties
had received independent legal advice on the matter including advise
with respect to the position as would obtain under Indian law. Mr.
Mehta laid emphasis on Clause 11.2(a) specifically recording parties
acknowledging that the ultimate Award would be enforceable on its
terms and that it would not fall foul of Section 48 of the 1996 Act.
Mr. Mehta then took the Court through Clause 15.1 and 15.2 of the
Settlement Agreement and to the recitals appearing therein and which
clearly purport to record the understanding of respective parties that
the same constituted the entire agreement and that both parties had
also conceded and admitted to the factual position of the Settlement
Agreement having been arrived at after due negotiations and
ultimately drafted jointly by both sides. In view of the aforesaid, it
was Mr. Mehta's submission, that the argument based on economic
duress is liable to be outrightly rejected.
18. The Court firstly taking note of the submissions addressed on
the issue of a consent award and whether it would fall within the
ambit of the Convention. Undisputedly, the Convention does not
specifically define the expression "arbitral awards". The word
"award" as would be evident from Article I of the Convention, is
principally recognised as being a decision rendered in the backdrop of
differences that may have arisen between persons. Article I
contemplates arbitral awards to be not only those that may be rendered
by arbitrators appointed for each case but also those that may be
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rendered by institutions. Article V deals with the subject of
recognition and enforcement of awards. The said Article reads thus: -
―Article V
1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is invoked, only
if that party furnishes to the competent authority where the
recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II
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
arbitration proceedings or was otherwise unable to present his case;
or
(c) The award deals with a difference not contemplated by
or not falling within the terms of the submission to arbitration, or it
contains decisions on matters beyond the scope of the submission
to arbitration, provided that, if the decisions on matters submitted
to arbitration can be separated from those not so submitted, that
part of the award which contains decisions on matters submitted to
arbitration may be recognized and 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.‖
19. As would be evident from the aforesaid extract, a consent award
is neither specifically excluded from its ambit nor does Article V
declare that an award that may be drawn on the basis of a settlement
between parties would not fall under the Convention. While it may be
true that the suggestions mooted by the Federal Republic of Germany
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and Austria did not ultimately translate into specific provisions being
engrafted in the Convention, this Court finds the same to be a
circumstance wholly insignificant for the purposes of answering the
question that stands posited. Regard must be had to the fact that the
Convention desists from defining the expression ―award‖ itself. The
various Articles of the Convention clearly indicate arbitration being
recognised as a dispute resolution mechanism which may be adopted
once disputes arise between the parties. Thus, what triggers the
arbitral process is the existence of disputes.
20. However, no Article of the Convention proscribes arbitral
proceedings from being brought to a close once parties arrive at a
settlement. All settlements and agreements that may come into being
could thus be adopted by an Arbitral Tribunal for rendering an
effective quietus to the disputes that existed. The adoption of the terms
of the settlement in the Award is a measure aimed primarily at
ensuring that it binds parties, makes it enforceable in law and thus
transcend beyond and above a mere private agreement between the
parties.
21. As has been succinctly observed in Albtelecom and Transocean,
while a settlement drawn outside arbitral proceedings may be
distinguished from consent terms coming to be struck once arbitral
proceedings had commenced, there exists no justification to construe
the provisions of the Convention as being inapplicable to consent
awards. Both Albtelecom as well as Transocean allude to the absence
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of precedent or material which may have lent support to the
contention that a consent award is a concept which is wholly alien to
the Convention. The Court thus finds no justification to take a view
contrary to that expressed in Albtelecom and Transocean.
22. The submission addressed in this regard may also be tested on
the ground of larger public policy as recognised across jurisdictions.
Undisputedly, the 1996 Act engrafts specific provisions for settlement
terms being given the form of an arbitral award. In fact, Section 30(4)
clearly stipulates that an arbitral award on agreed terms shall have the
same status and effect as any other award on the substance of the
dispute. Sub section (4) is essentially a reiteration of the well settled
principle of Indian jurisprudence that a decree drawn on consent
operates with equal vigour and stands on the same pedestal as a decree
which may ultimately come to be drawn upon due contest.
23. The Court then notes that parties had in unambiguous terms
agreed upon the arbitration being governed by the ICC Arbitration
Rules. Article 33 of those Rules specifically deals with the subject of
award by consent. The said Article is reproduced hereinbelow: -
"Article 33: Award by Consent
If the parties reach a settlement after the file has been
transmitted to the arbitral tribunal in accordance with Article 16,
the settlement shall be recorded in the form of an award made
by consent of the parties, if so requested by the parties and if the
arbitral tribunal agrees to do so.‖
24. The concept of an award incorporating the terms of settlement
and to be rendered on consent also find resonance in various other
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statutory enactments and institutional rules. Undisputedly, the
Arbitration Act of 199612 of the United Kingdom too contemplates
parties arriving at a settlement in the course of arbitral proceedings
and the same culminating in the rendering of an award by consent.
This is evident from Section 51 of the English Act, which is
reproduced hereinbelow: -
―51 Settlement.
(1) If during arbitral proceedings the parties settle the dispute, the
following provisions apply unless otherwise agreed by the parties.
(2) The tribunal shall terminate the substantive proceedings and, if
so requested by the parties and not objected to by the tribunal, shall
record the settlement in the form of an agreed award.
(3) An agreed award shall state that it is an award of the tribunal
and shall have the same status and effect as any other award on the
merits of the case.
(4) The following provisions of this Part relating to awards
(sections 52 to 58) apply to an agreed award.
(5) Unless the parties have also settled the matter of the payment of
the costs of the arbitration, the provisions of this Part relating to
costs (sections 59 to 65) continue to apply.‖
25. Undoubtedly, the UNCITRAL Model Law on International
Commercial Arbitration13 too incorporates provisions for an award
being rendered on consent. In fact, Section 30 of the 1996 Act is a
reiteration of the model law provisions. Article 30 of the Model Law
is reproduced hereinbelow:-
"Article 30. Settlement
(1) If, during arbitral proceedings, the parties settle the dispute,
the arbitral tribunal shall terminate the proceedings and, if
requested by the parties and not objected to by the arbitral
English Act
13 Model Law
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tribunal, record the settlement in the form of an arbitral award
on agreed terms.
(2) An award on agreed terms shall be made in accordance with
the provisions of article 31 and shall state that it is an award.
Such an award has the same status and effect as any other award
on the merits of the case.‖
26. Insofar as institutional rules are concerned, the Court takes note
of Article 26.9 of the Arbitration Rules framed by the London
Court of International Arbitration14, which reads as under: -
―26.9 In the event of any final settlement of the parties' dispute,
the Arbitral Tribunal may decide to make an award recording
the settlement if the parties jointly so request in writing (a
―Consent Award‖), provided always that such Consent Award
shall contain an express statement on its face that it is an award
made at the parties' joint request and with their consent. A
Consent Award need not contain reasons or a determination in
relation to the Arbitration Costs or Legal Costs. If the parties do
not jointly request a Consent Award, on written confirmation by
the parties to the LCIA Court that a final settlement has been
reached, the Arbitral Tribunal shall be discharged and the
arbitration proceedings concluded by the LCIA Court, subject to
payment by the parties of any outstanding Arbitration Costs in
accordance with Articles 24 and 28.‖
27. Similar provisions stand incorporated in the International
Convention on the Settlement of Investment Disputes between
States and Nationals of Other States 15Arbitration Rules in terms
of Rule 55, which is reproduced hereinbelow: -
"Rule 55
Settlement and Discontinuance by Agreement of the Parties
LCIA
ICSID
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(1) If the parties notify the Tribunal that they have agreed to
discontinue the proceeding, the Tribunal shall issue an order
taking note of the discontinuance.
(2) If the parties agree on a settlement of the dispute before the
Award is rendered, the Tribunal:
(a) shall issue an order taking note of the discontinuance
of the proceeding, if the parties so request; or
(b) may record the settlement in the form of an Award, if
the parties file the complete and signed text of their
settlement and request that the Tribunal embody such
settlement in an Award.
(3) The Secretary-General shall issue the order referred to in
paragraphs (1) and (2)(a) if the Tribunal has not yet been
constituted or if there is a vacancy on the Tribunal.‖
28. The Singapore International Arbitration Centre16 in the
SIAC Rules adopts similar provisions as would be evident from a
reading of Rule 32.10 which reads as follows:-
―32.10 In the event of a settlement, and if the parties so request,
the Tribunal may make a consent Award recording the
settlement. If the parties do not require a consent Award, the
parties shall confirm to the Registrar that a settlement has been
reached, following which the Tribunal shall be discharged and
the arbitration concluded upon full settlement of the costs of the
arbitration.‖
29. The International Council for Commercial Arbitration17 in
its "Guide to the Interpretation of the 1958 New York
Convention: A Handbook for Judges" expresses the following
opinion on the meaning to be ascribed to arbitral decisions:-
―Consequently, the following arbitral decisions qualify as
awards:
- Final awards, i.e., awards that put an end to the arbitration. An
award dealing with all the claims on the merits is a final award.
SIAC
ICCA
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So is an award denying the tribunal's jurisdiction over the
dispute submitted to it;
- Partial awards, i.e., awards that give a final decision on part of
the claims and leave the remaining claims for a subsequent
phase of the arbitration proceedings. An award dealing with the
claim for extra costs in a construction arbitration and leaving
claims for damages for defects and delay for a later phase of the
proceedings is a partial award (this term is sometimes also used
for the following category, but for a better understanding, it is
preferable to distinguish them);
- Preliminary awards, sometimes also called interlocutory or
interim awards, i.e., awards that decide a preliminary issue
necessary to dispose of the parties' claims, such as a decision on
whether a claim is time-barred, on what law governs the merits,
or on whether there is liability;
- Awards on costs, i.e., awards determining the amount and
allocation of the arbitration costs;
- Consent awards, i.e., awards recording the parties' amicable
settlement of the dispute.‖
30. The UNCITRAL Secretariat Guide on the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards
while dealing with consent awards observes as follows: -
"d. Consent awards
36. The Convention is silent on the question of its applicability
to decisions that record the terms of a settlement between
parties. During the Conference, the issue of the application of
the Convention to such decisions was raised, but not decided
upon. Reported case law does not address this issue.‖
Insofar as the understanding of the legal position and as contained in
the aforenoted guide is concerned, the Court only observes that it does
not appear to take into consideration the decisions rendered in
Albtelecom and Transocean. In fact, this was an aspect which was
duly noted by the court rendering judgment in Transocean.
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31. REDFERN AND HUNTER ON INTERNATIONAL
ARBITRATION, SIXTH EDITION explains the concept of a
consent award in the following terms: -
"(e) Consent awards and termination of proceedings without an award
9.34 As in litigation in national courts, parties to an international
arbitration often arrive at a settlement during the proceedings.
Where this occurs, the parties may simply implement the
settlement agreement and thus revoke the mandate of the arbitral
tribunal. This means that the jurisdiction and powers conferred on
the arbitral tribunal by the parties are terminated.
9.35 In many cases, however, the parties find it desirable for the
terms of settlement to be embodied in an award. There are many
reasons for this. The most important is that it is usually easier for
a party to enforce performance by the other party of a future
obligation if chat obligation is contained in an award (in respect
of which the assistance of the New York Convention may be
available), rather than to take further steps to enforce a settlement
agreement. Other reasons for obtaining a consent award include
the desirability (particularly where a state or state agency is
involved) of having a definite and identifiable 'result' of the
arbitral proceedings, in the form of an award, which may be
passed to the appropriate paying authority for implementation. In
this context, the signatures of the arbitrators on the consent award
indicate a measure of approval by the arbitral tribunal to the
agreement reached by the parties. Thís may help to meet
politically motivated criticism of those responsible for taking the
decision to reach a compromise settlement.
9.36 There should be little or no problem as far as capacity to
compromise is concerned. Many countries adopt as their
definition of matters that are capable of resolution by arbitration
(that is, matters that are `arbitrable') the concept that parties may
refer to arbitration any disputes in respect of which they are
entitled to reach a compromise. The reverse holds good: if parties
are entitled to refer a dispute to arbitration, they are entitled to
reach a compromise in respect of the dispute.
9.37 No restrictions are imposed by national law, or international
or institutional rules of arbitration, to the effect that, once arbitral
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proceedings have been commenced, the parties cannot terminate
them by agreement. On the contrary, a settlement is invariably
welcomed, and it may be possible to have it recorded in an agreed
award, Article 30 of the Model Law provides for such an agreed
award; Article 36(1) of the UNCITRAL Rules provides for a
settlement to be recorded by an order or by an award:
If, before the award is made, the parties agree on a settlement
of the dispute, the arbitral tribunal shall either issue an order
for the termination of the arbitral proceedings or, if requested
by the parties and accepted by the tribunal, record the
settlement in the form of an arbitral award on agreed terms,
The arbitral tribunal is not obliged to give reasons for such an
award.
The ICC Rules contain a similar provision, at Article 32, if the
parties reach a settlement, after the file has been transmitted to the
arbitral tribunal in accordance with Article 13, then the settlement
shall be recorded in the form of an award made by consent of the
parties, if so requested by the parties and if the arbitral tribunal
agrees to do so. The word 'shall' is mandatory and suggests an
oblígation to record any settlement in a consent award. However,
it is qualified by the requirements that the parties must request
such an award and the tribunal must agree to it. This indicates
that, under the UNCITRAL and 1CC Rules, there is no obligation
for either the parties or the tribunal to make a consent award.
9.38 Under whatever rules the parties are proceeding,
however, it would be a normal act of courtesy to inform the
arbitral tribunal (and the appropriate arbitral institution, if one is
involved) of any settlement agreement reached between the
parties, particularly if meetings or hearings have already been
held. There may also be sound financial reasons for doing what
normal courtesy demands. First, notifying the arbitral tribunal of a
settlement will ensure that it does not incur further fees and
expenses (other than any cancellation fees that may have been
agreed), Secondly, such notification might lead to a refund of
advance payments made to cover fees and expenses, since the
actual costs incurred may well be less than expected if the case
has been settled without a hearing. Thirdly, as already indícated,
it is desirable to put the terms of settlement into an enforceable
form when there is an element of future performance. Although
most settlements involve immediate implementation of the agreed
terms, it is nevertheless not unusual for there to be provisíon for
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payment by instalments, or for some future transaction between
the parties to be carried out.
9.39 A question occasionaly arises as to the role of an arbitral
tribunal that is requested by the parties to make a consent award
ordering the performance of an unlawful act. Examples might be
the manufacture of an internationally banned drug, or these
smuggling of contraband or-perhaps more realisticaly-an
agreement that manifestly contravenes relevant competition or
antitrust laws. At one time, various sets of rules (including the
ICC Rules prior to 1998) seemed to leave the tribunal with no
discretion, but modern rules and legislation permit the arbitral
tribunal to refuse to make a consent award.‖
32. The Court, consequently, comes to the firm conclusion that the
argument of a consent award not falling within the scope of the
Convention merits rejection. There clearly appears to be unanimity
across jurisdictions to accept the possibility of awards being rendered
based upon a settlement that may be arrived at between the parties.
The only distinction that the decisions in Albtelecom and Transocean
recognise is of settlements entered into prior to initiation of arbitration
proceedings and those which may be arrived at during the course
thereof. There thus appears to be no legal justification to hold that
consent awards are either not liable to be recognised or are
unenforceable. In light of unanimity of opinion on the subject across
jurisdictions and which has been duly adopted and incorporated in the
1996 Act, the Court finds that the Award cannot possibly be said to be
contrary to the public policy of India.
33. The Court also bears in mind the special care that the Arbitral
Tribunal clearly appears to have conferred upon the settlement before
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proceeding to confer upon it the status of an Award. The Arbitral
Tribunal had duly circulated a draft award and invited the comments
of respective sides. It was only once those responses were received
that it proceeded to pronounce the Award formally. The respondents
had undisputedly vide their email of 04 September 2020 expressed
their consent for the Tribunal to proceed in terms of the settlement.
The objections raised on this score are for reasons aforenoted rejected.
34. That takes the Court then to consider the argument of economic
duress. As was rightly contended by Mr. Mehta, the respondents were
duly represented by counsels before the Arbitral Tribunal at all stages
of the proceedings which were drawn. The fact that the settlement
terms were drawn after parties had obtained independent legal opinion
is a fact which stands clearly recorded in the Settlement Agreement
itself. The Arbitral Tribunal too had been cautious to obtain the
opinion and consent of parties before proceedings to adopt the
Settlement Agreement and give it the form of an Award. It becomes
pertinent to note that at no stage prior to the filing of the present
objections had the respondents taken the plea of economic duress or
coercion.
35. The concept of duress and its relationship with the formation of
contracts was lucidly explained by the Privy Council in its decision in
Pao On And Lau Yiu Long,18 in the following terms: -
―The third question
[1980] A.C. 614
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Duress, whatever form it takes, is a coercion of the will so
as to vitiate consent. Their Lordships agree with the observation
of Kerr J. in Occidental Worldwide Investment Corporation v.
Skibs A/S Avanti [1976] 1 Lloyd's Rep. 293, 336 that in a
contractual situation commercial pressure is not enough. There
must be present some factor "which could in law be regarded as
a coercion of his will so as to vitiate his consent." This
conception is in line with what was said in this Board's decision
in Barton v. Armstrong [1976] A.C. 104, 121 by Lord
Wilberforce and Lord Simon of Glaisdale - observations with
which the majority judgment appears to be in agreement. In
determining whether there was a coercion of will such that there
was no true consent, it is material to inquire whether the person
alleged to have been coerced did or did not protest; whether, at
the time he was allegedly coerced into making the contract, he
did or did not have an alternative course open to him such as an
adequate legal remedy; whether he was independently advised;
and whether after entering the contract he took steps to avoid it.
All these matters are, as was recognised in Maskell v.
Horner [1915] 3 K.B. 106, relevant in determining whether he
acted voluntarily or not.
In the present case there is unanimity amongst the judges
below that there was no coercion of the first defendant's will. In
the Court of Appeal the trial judge's finding (already quoted)
that the first defendant considered the matter thoroughly, chose
to avoid litigation, and formed the opinion that the risk in giving
the guarantee was more apparent than real was upheld. In short,
there was commercial pressure, but no coercion. Even if this
Board was disposed, which it is not, to take a different view, it
would not substitute its opinion for that of the judges below on
this question of fact.
It is, therefore, unnecessary for the Board to embark upon
an inquiry into the question whether English law recognises a
category of duress known as "economic duress." But, since the
question has been fully argued in this appeal, their Lordships
will indicate very briefly the view which they have formed. At
common law money paid under economic compulsion could be
recovered in an action for money had and received Astley v.
Reynolds (1731) 2 Str. 915. The compulsion had to be such that
the party was deprived of "his freedom of exercising his will"
(see p. 916). It is doubtful, however, whether at common law
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any duress other than duress to the person sufficed to render a
contract voidable: sec Blackstone's Commentaries, Book 1, 12th
ed. pp. 130-131 and Skeate v. Beale (1841) 11 Ad. & E. 983.
American law (Williston on Contracts, 3rd ed.) now recognises
that a contract may be avoided on the ground of economic
duress. The commercial pressure alleged to constitute such
duress must, however, be such that the victim must have entered
the contract against his will, must have had no alternative course
open to him, and must have been confronted with coercive acts
by the party exerting the pressure: Williston on Contracts, 3rd
ed., vol. 13 (1970), section 1603. American judges pay great
attention to such evidential matters as the effectiveness of the
alternative remedy available, the fact or absence of protest, the
availability of independent advice, the benefit received, and the
speed with which the victim has sought to avoid the contract.
Recently two English judges have recognised that commercial
pressure may constitute duress the pressure of which can render
a contract voidable: Kerr J. in Occidental Worldwide Investment
Corporation v. Skibs A/S Avanti [1976] 1 Lloyd's Rep. 293 and
Mocatta J. in North Ocean Shipping Co. Ltd. v. Hyundai
Construction Co. Ltd. [1979]3 W.L.R. 419. Both stressed that
the pressure must be such that the victim's consent to the
contract was not a voluntary act on his part. In their Lordships'
view, there is nothing contrary to principle in recognising
economic duress as a factor which may render a contract
voidable, provided always that the basis of such recognition is
that it must amount to a coercion of will, which vitiates consent.
It must be shown that the payment made or the contract entered
into was not a voluntary act.‖
36. ―Duress‖ as per the principles enunciated in Pao On could be
raised as a ground to resile from a contract provided a party is able to
establish that the coercion was of such a degree which would lead one
to conclude that the consent of the victim to the contract was not a
voluntary act. It is ultimately the obligation of the victim to establish
that coercion clearly vitiated consent itself.
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37. This aspect also fell for consideration of a learned Judge of our
Court in Sara International Limited versus Rizhao Steel Holding
Group Company Limited19 where the principle of economic duress
was explained as comprising of elements of coercion and the same
being established to taint the consent itself. Sara International
assumes added significance for our purposes since it also holds that
parties having failed to raise an objection of economic duress at the
first available opportunity or where it is shown that consent was
arrived at upon due consideration and on receipt of legal advice, an
allegation of economic duress would not sustain. The Court deems it
apposite to refer to the following passages from the aforenoted
decision:-
"20. Mr. Vasisht submits that commercial contracts can be
avoided on the ground of economic duress if facts of the case
justify such a decision. He points out that this Court in Double
Dot Finance Limited v. Goyal MG Gases Limited, 2005 (117)
DLT 330, held that there was no economic duress and the said
order was upheld by a Division Bench of this Court in Goyal
MG Gases Limited v. Double Dot Finance Limited, 2009 (2)
Arb LR, 655.
21. He further points out that in Unikol Bottlers Ltd. v. Dhillon
Kool Drinks, AIR 1995 Delhi 25, (Paragraphs 31 to 37), the
concept of economic duress was discussed in detail and was
recognized, but once again the Court, in the facts of that case,
did not find any economic duress. The learned Single Judge in
the said case observed, ―......while dealing with the question of
duress/coercion and unequal bargaining power one is really
concerned with the question of free will, i.e. did not parties enter
into the agreement with a free will? It is the plaintiff who has
raised the question of its will being dominated by the defendants
and, therefore, not being a free agent. Therefore, the plaintiff is
2013 SCC OnLine Del 2236
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on test. It has to be ascertained whether the plaintiff exercised a
free will or not while entering into the Supplemental Agreement.
For this purpose there are several factors which need to be
looked into. They are-
1. Did the plaintiff protest before or soon after the
agreement?
2. Did the plaintiff take any steps to avoid the contract?
3. Did the plaintiff have an alternative course of action or
remedy? If so, did the plaintiff pursue or attempt to pursue
the same?
4. Did the plaintiff convey benefit of independent advice?"
22. After hearing learned counsel for the plaintiff and the amicus
curiae, this Court is of the opinion that the necessary ingredients
to successfully avoid a contract on the ground of economic
duress claim are : -
(a) Pressure which is illegitimate;
(b) Its effect on the victim i.e. that the pressure must be a
significant cause inducing the Claimant to enter into the
contract;
(c) Lack of reasonable alternative i.e. that the practical
effect of the pressure was that there is compulsion on, or a
lack of practical choice for, the victim.
23. A Court while deciding an issue of economic duress has also
to keep in mind whether there was protest by the victim before
or soon after the impugned contract and whether the victim had
benefit of independent advice.
24. It is pertinent to mention that in DSND Subsea
Ltd. v. Petroleum Geo Services ASA 2000 WL 1741490, the
Court observed that ―Illegitimate pressure must be distinguished
from the rough and tumble of the pressures of normal
commercial bargaining."
25. In CTN Cash and Carry Ltd. v. Gallaher Ltd. [1994] 4 All
ER 714, the Court stated that the fact that the Defendant was in
a monopoly position as the sole distributor of popular brands of
cigarettes was irrelevant and could not convert what was not
otherwise duress into duress since the common law does not
recognise the doctrine of inequality of bargaining power in
commercial dealings. Steyn LJ in the case observed, ―I also
readily accept that the fact that the defendants have used lawful
means does not by itself remove the case from the scope of the
doctrine of economic duress..........On the other hand, Goff and
Jones The Law of Restitution (3rd edn, 1986) p 240 observed that
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Signing Date:30.05.2023
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English courts have wisely not accepted any general principle
that a threat not to contract with another, except on certain
terms, may amount to duress.......... Outside the field of
protected relationships, and in a purely commercial context, it
might be a relatively rare case in which „lawful act duress‟ can
be established. And it might be particularly difficult to establish
duress if the defendant bona fide considered that his demand
was valid. In this complex and changing branch of the law I
deliberately refrain from saying „never‟. But as the law stands, I
am satisfied that the defendants' conduct in this case did not
amount to duress."
38. Reverting to the facts of the present case and those which have
been noticed hereinabove, however, leads this Court to come to the
irresistible conclusion that the allegation of economic duress and
coercion is clearly an afterthought and a feeble attempt to renege from
the terms of the consent Award. The said objection, for all the
aforesaid reasons thus fails and stands negated. The Court thus comes
to the firm conclusion that the Award is clearly enforceable and does
not fall foul of any of the negative stipulations that stand incorporated
in Section 48 of the 1996 Act.
39. The objections to the recognition and enforcement of the
foreign award stand rejected. Ex. Appl. (OS) 3525/2022 be now
placed before the appropriate Court for taking further steps for
execution of the Award.
40. List before the roster Bench on 27.07.2023.
YASHWANT VARMA, J.
MAY 30, 2023 / SU
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Digitally Signed
By:NEHA
Signing Date:30.05.2023
16:09:14
