2015 (4) TMI 1167 - HC - Indian Laws

Arbitration proceedings - foreign award enforcibility - Whether Arbitration Petition filed under section 34 of the Arbitration and Conciliation Act, 1996 challenging the impugned foreign award is maintainable? - Held that - A perusal of the order passed by this court in the arbitration petition filed by the respondents under section 9 concludes the issue that the parties were governed by the English law for all the purposes. In my view, the said order passed by this court thus assist the respondents and not the petitioners. The petitioners thus could not have filed the petition under section 34 of the Arbitration and Conciliation Act, 1996 on the premise that the petition under section 9 was filed by the respondents in this court under Part I of the Arbitration and Conciliation Act, 1996. In these circumstances in my view there is thus no merit in this submission of the learned counsel for the petitioners. Whether the petitioners can be allowed to agitate the issue of there being no arbitration agreement between the petitioners and the respondents or that the composition of the arbitral tribunal was not in accordance with the alleged arbitration agreement? - Held that - There is no substance in the submission of the learned counsel for the petitioners that on the ground that there being no alleged agreement between the parties, the issue of nullity could be raised by the petitioners under section 48 of the Arbitration and Conciliation Act while opposing enforcement of an foreign award. As this court has held that the petitioners not having challenged interim declaratory award as well as final award in accordance with the provisions of English Arbitration Act and both these awards have become final and binding between the parties, no such objection can be allowed under section 48 of the Arbitration and Conciliation Act. In so far as submission of the learned counsel that a party can challenge a composition of arbitral tribunal any time and even under the provisions of section 34 or at the stage of section 48 is concerned, in my view since the petitioners have not challenged the findings and conclusion of the arbitral tribunal rejecting such plea in the declaratory arbitration award under the provisions of English Arbitration Act, the petitioners have lost their right to challenge those findings. Petitioners cannot be allowed to challenge those findings under section 34 or under section 48. No prior permission of the Reserve Bank or any other authority was required under the provisions of Foreign Exchange Management (Guarantees) Regulation, 2000 or there was no prohibition from issuing such letter of guarantee under the said regulation and the petitioner not having raised any such issue prior to the date of filing their objections before the arbitral tribunal from the date of execution of such letter of guarantee, the recognition and enforcement of foreign award in question cannot be denied. In my view even if prior permission of the Reserve Bank would have been required which was admittedly not obtained by the petitioner before execution of such guarantee, the recognition and enforcement of such foreign award based on such guarantee would not be contrary to fundamental policy of Indian law and would also not be contrary to the interest of India or justice of morality. We are therefore of the view that Arbitration Petition No.76 of 2012 is not maintainable under section 34 of the Arbitration and Conciliation Act, 1996 and thus deserves to be dismissed as not maintainable. In so far as Arbitration Petition No.12 of 2012 is concerned, in my view the petitioner M/s.POL India Projects Limited who are respondents to the said petition have not furnished any proof before this court as to why enforcement of the foreign award may be refused. The said foreign award is enforceable under Part II and is binding for all purposes on the parties under section 46 of the Arbitration and Conciliation Act, 1996. I am therefore of the view that the foreign award is already stamped as decree and the claimant holding such foreign award has become entitled for enforcement of the award having taken effective steps for execution of the award. In my view, the petition for enforcement of the foreign award is in accordance with and in compliance with section 47 of the Arbitration and Conciliation Act, 1996. As this court has taken a view that the said foreign award is enforceable, the respondents herein i.e. Aurelia Reederei Eugen Friederich GmbH Schiffahrtsgesellschaft & Company KG can proceed to take further effective steps for execution of the same. In the circumstances the claimant is directed to put the award in execution in accordance with the rules of this court.

Issues Involved:

1. Maintainability of Arbitration Petition No.76 of 2012 under Section 34 of the Arbitration and Conciliation Act, 1996.
2. Existence of a valid arbitration agreement between the parties.
3. Composition and jurisdiction of the arbitral tribunal.
4. Enforcement of the foreign award under Part II of the Arbitration and Conciliation Act, 1996.
5. Compliance with Foreign Exchange Management (Guarantees) Regulations, 2000.

Detailed Analysis:

1. Maintainability of Arbitration Petition No.76 of 2012:

The court examined whether Arbitration Petition No.76 of 2012, filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the foreign award, was maintainable. It was established that the arbitration proceedings were governed by English law and held in London, making the award a foreign award. The court held that Part I of the Arbitration and Conciliation Act, 1996, including Section 34, did not apply to foreign awards. The petitioners had not challenged the declaratory arbitration award under the English Arbitration Act, thus losing their right to object to the final award. The court concluded that the petition under Section 34 was not maintainable.

2. Existence of a Valid Arbitration Agreement:

The court addressed the petitioners' contention that there was no valid arbitration agreement between the parties. The petitioners argued that the letter of guarantee did not incorporate the arbitration clause from the charter party agreement. However, the court found that the arbitration agreement in the charter party, which included the Gencon terms, was incorporated into the letter of guarantee. The petitioners were aware of the arbitration clause and had acted as managers for D.B. Shipping LLC. The arbitral tribunal's finding that the arbitration agreement existed was upheld.

3. Composition and Jurisdiction of the Arbitral Tribunal:

The petitioners challenged the composition and jurisdiction of the arbitral tribunal, arguing that the tribunal was not constituted in accordance with the agreement. The court noted that both parties had nominated their arbitrators, and the chairman was appointed by the nominee arbitrators, in accordance with the English Arbitration Act. The tribunal had already ruled on its jurisdiction in the declaratory award, which was not challenged by the petitioners. The court held that the petitioners could not re-litigate this issue.

4. Enforcement of the Foreign Award:

The court examined the enforceability of the foreign award under Part II of the Arbitration and Conciliation Act, 1996. It was established that the foreign award was binding and enforceable. The court rejected the petitioners' objections based on the alleged non-existence of an arbitration agreement and improper composition of the tribunal. The court emphasized that the grounds for refusing enforcement under Section 48 are limited and do not permit a re-examination of the merits of the award.

5. Compliance with Foreign Exchange Management (Guarantees) Regulations, 2000:

The petitioners argued that the letter of guarantee was issued in violation of the Foreign Exchange Management (Guarantees) Regulations, 2000, as no prior permission from the Reserve Bank of India (RBI) was obtained. The court referred to the Division Bench judgment in Videocon Industries Ltd. v. Intesa Sanpaolo S.P.A., which held that prior permission from the RBI was not required for issuing such guarantees. The court found that the petitioners had not raised this issue at any stage before the arbitral tribunal or earlier, and it could not be raised at this stage. The court concluded that the enforcement of the award was not contrary to the fundamental policy of Indian law or public policy.

Conclusion:

The court dismissed Arbitration Petition No.76 of 2012 as not maintainable under Section 34 of the Arbitration and Conciliation Act, 1996. Arbitration Petition No.12 of 2012 was allowed, making the foreign award enforceable. The petitioners were directed to comply with the award, and no costs were awarded.

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