1987 (1) TMI 493 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the High Court's decision to vacate the restraint order.
2. Jurisdiction of the Indian Court versus the American Court.
3. Enforceability of the arbitral award under the Indian Arbitration Act, 1940.
4. Potential for conflicting judgments between Indian and American courts.
5. Appropriateness of granting a restraint order against the Western Company.

Summary:

1. Validity of the High Court's Decision to Vacate the Restraint Order:
The Supreme Court examined whether the High Court was correct in vacating the restraint order that initially prevented the Western Company from proceeding with an action in a USA Court to enforce an arbitral award. The High Court vacated the interim order on the grounds that the Western Company could enforce the award in the US Court, ONGC could contest the award's enforcement in the US, and the US proceedings were not vexatious or oppressive.

2. Jurisdiction of the Indian Court versus the American Court:
The arbitration clause in the contract specified that disputes would be governed by the Indian Arbitration Act, 1940, and the laws of India. Under Indian law, an arbitral award is not enforceable until it is made a rule of the Court. The Supreme Court emphasized that the Indian Court alone has jurisdiction to determine the enforceability of the award, and the Western Company's action in the US Court could lead to conflicting judgments, creating legal chaos.

3. Enforceability of the Arbitral Award under the Indian Arbitration Act, 1940:
The award rendered by the Umpire might be set aside by the Indian Court, leading to an anomalous situation if the US Court enforces it. The Supreme Court noted that under the Indian Arbitration Act, an award is unenforceable until it is made a rule of the Court, and the Western Company's action in the US Court violated the arbitration clause by seeking confirmation of the award under American law.

4. Potential for Conflicting Judgments:
The Supreme Court highlighted the risk of conflicting decisions between the Indian and American courts. If the American Court confirms the award while the Indian Court sets it aside, it would result in irreversible damage to ONGC, as the Western Company could recover the awarded amount in the US despite the award being invalid in India.

5. Appropriateness of Granting a Restraint Order:
The Supreme Court found considerable force in ONGC's arguments and concluded that not granting a restraint order would be unjust and oppressive to ONGC. The Court decided to grant the restraint order but made it conditional upon ONGC paying the undisputed amount to the Western Company, emphasizing the need to act in a just and equitable manner.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's order vacating the restraint order, and restored the initial restraint order. The Court directed ONGC to pay the undisputed amount to the Western Company, subject to the final outcome of the arbitration petition pending in the Bombay High Court. The matter was referred to a Division Bench for expeditious disposal.