1999 (9) TMI 940 - SC - Companies Law

Whether there was no agreement in writing between the parties requiring the disputes arising out of the contract being referred to arbitration in accordance with the arbitration rules of GAFTA ? Held that - The case at hand is clearly covered by Exception 1 to Section 28. Right of the parties to have recourse to legal action is not excluded by the agreement. The parties are only required to have their dispute/s adjudicated by having the same referred to arbitration. Merely because the arbitrators are situated in a foreign country cannot by itself be enough to nullify the arbitration agreement when the parties have with their eyes open willingly entered into the agreement. Moreover, in the case at hand the parties have willingly initiated the arbitration proceedings on the disputes having arisen between them. They have appointed arbitrators, participated in arbitration proceedings and suffered an award. The plea raised before us was not raised either before or during arbitration proceedings, nor before the learned Single Judge of the High Court in the objections filed before him, nor in the Letters Patent Appeal filed before the Division Bench. Such a plea is not available to be raised by the appellant Atlas before this Court for the first time. For the foregoing reasons, we find no fault with the award having been made rule of the Court by the High Court. The appeal is dismissed

Summary

Issues:
1. Incorporation of arbitration clause by reference in the contract.
2. Enforceability of the arbitration award under the Foreign Awards Act.
3. Opposition to public policy under Section 23 and Section 28 of the Contract Act.

Issue 1: Incorporation of arbitration clause by reference in the contract

The case involved a contract between parties where an arbitration clause from the Standard Contract No.15 of GAFTA was incorporated by reference. The appellant objected to the arbitration based on lack of a specific written agreement. However, the Supreme Court held that the incorporation of arbitration provisions from another document is permissible as long as it is sensible and consistent with the terms of the contract. The Court referred to the case of Alimenta S.A. Vs. National Agricultural Co-operative Marketing Federation of India Ltd., emphasizing that unless the arbitration clause is insensible or inconsistent, it is binding between the parties. The Court found that the appellant was aware of the terms and conditions of the GAFTA contract, thus rejecting the objection raised by the appellant.

Issue 2: Enforceability of the arbitration award under the Foreign Awards Act

After the arbitration proceedings, the arbitrators issued an award in favor of one party. The party sought enforcement of the award under the Foreign Awards (Recognition and Enforcement) Act, 1961. The High Court of Bombay ruled in favor of enforcing the award, and the appellant raised objections which were rejected. The Supreme Court upheld the High Court's decision, stating that the appellant did not raise any objections during the arbitration proceedings, before the Single Judge, or in the Letters Patent Appeal. As a result, the Court found no fault in enforcing the award and dismissed the appeal.

Issue 3: Opposition to public policy under Section 23 and Section 28 of the Contract Act

The appellant contended that the arbitration agreement was against public policy under Section 23 and Section 28 of the Contract Act. The argument was based on the agreement compelling Indian parties to arbitrate with foreign arbitrators, allegedly excluding remedies under Indian law. The Court referred to Section 28 and Exception 1, which allows parties to agree on arbitration for resolving disputes. The Court found that the parties willingly entered into the arbitration agreement, participated in the proceedings, and did not raise objections earlier. As a result, the Court held that the arbitration agreement did not violate public policy and dismissed the appeal.

In conclusion, the Supreme Court dismissed the appeal, upholding the enforceability of the arbitration award under the Foreign Awards Act and rejecting objections related to the incorporation of the arbitration clause and public policy concerns.