2001 (8) TMI 1303 - SC - Companies Law

Whether the requirement was met in the present case and found that the signature of the agent of the carrier was not sufficient since his power of attorney was not in writing and that the signature of the other party was also lacking and his endorsement does not replace the signature, since the former concerns only a transfer of title, whilst the latter is necessary for the formation of the contract? Held that - Appeal dismissed. The appellant cannot any longer challenge the existence of an arbitration agreement between the parties and such an agreement was not covered by the New York Convention. The arbitrators view was acceptable that the force majeure clause had no limitation on the period of suspension of the contract while the execution was affected by a valid force majeure that it had been accepted by both the parties and that the restriction and requirements imposed by the RBI directives must be construed as having caused interference in and/or hindrance to the execution of the contract time wise; that though time had been considered to be of the essence condition, the inclusion of the force majeure clause which provided no time limit to the suspension of the contract caused by conditions envisaged herein though unusual it was accepted that the earlier contracts would be negotiated and executed successfully by the parties to the dispute.

Issues Involved:
1. Validity of the arbitration agreement.
2. Application of the principle of res judicata.
3. Public policy and force majeure clause.
4. Award of interest by the arbitrators.

Detailed Analysis:

1. Validity of the Arbitration Agreement:
The appellant contended that the foreign award could only be enforced if it was pursuant to a written agreement for arbitration, as per the New York Convention. The contracts in question (S-142 and S-336) were not signed by the appellant, thus allegedly resulting in only an oral agreement. The appellant argued that such an agreement could not be considered a written one under Article II of the Schedule to the Act. Various international cases were cited to support the argument that a written agreement requires signatures from both parties or an exchange of letters or telegrams.

In response, the respondent argued that the Bombay High Court had already determined the existence of an arbitration agreement, making it res judicata. The respondent also highlighted the appellant's conduct, such as opening letters of credit and invoking the force majeure clause, which indicated acknowledgment of the contracts and arbitration clauses.

The court concluded that the appellant's actions, including the opening of letters of credit and correspondence referring to the contracts, indicated an agreement in writing. Therefore, the arbitration clause was binding.

2. Application of the Principle of Res Judicata:
The appellant argued that the principle of res judicata did not apply as the Bombay High Court's decision on the arbitration agreement was made before the award was passed. The court, however, referenced the Renusagar Power Co. Ltd. case, which allowed the determination of the existence, validity, or effect of an arbitration agreement at three stages: before arbitration proceedings commence, during their pendency, and after the award is made. Given this, the court held that the Bombay High Court's decision was binding.

3. Public Policy and Force Majeure Clause:
The appellant contended that the award was contrary to the public policy of India, citing RBI circulars that imposed restrictions on imports, thus invoking the force majeure clause. The court referred to the Renusagar Power Co. Ltd. case, which defined "public policy" as the fundamental policy of Indian law, the interests of India, or justice or morality. The arbitrators had considered the RBI directives and concluded that the force majeure clause did not allow for the cancellation of shipments but only delayed them.

The court found the arbitrators' interpretation plausible and ruled that the restrictions imposed by the RBI did not constitute a complete bar on the contract's implementation. Thus, the award did not violate public policy.

4. Award of Interest by the Arbitrators:
The appellant challenged the interest awarded by the arbitrators, which included pre-award interest, pendente lite interest, and post-award interest. The court referenced the Renusagar Power Co. Ltd. case, which permitted the award of such interest under the Interest Act, 1978. The court found no exceptional circumstances to modify the award or the decree passed pursuant to it, despite fluctuations in the exchange rate.

Conclusion:
The court dismissed the appeal, upholding the arbitration agreement's validity, the application of res judicata, the arbitrators' interpretation of the force majeure clause, and the award of interest. The appellant's contentions were rejected on all points, and the appeal was dismissed with no order as to costs.

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