2014 (12) TMI 1339 - HC - Indian Laws

Maintainability of execution application - Appointment of arbitrators - Enforcement of a foreign award - interim order passed restraining the judgment debtor from withdrawing any sum from the bank accounts - GAFTA Rules - Held that - It is an institutionalized arbitration. The rules provide the manner in which the parties are to act in matters relating to arbitration. Elaborate procedures and mechanisms are provided in the Act for conduct of the arbitration. Rule 3 of GAFTA Rules deals with appointment of the Tribunal. It clearly shows that the disputes shall be heard and determined by a Tribunal or three Arbitrators (appointed in accordance with Rule 3.2) or if both parties agree by a single Arbitrator (appointment in accordance with Clause 3.1). Once the petitioner has named an arbitrator and sent the notice to the opposite party it was open to the opposite party either to accept the said name or to disagree with the same not later than 9th subsequent day after serving of the said notice failing which the consequences mentioned in the other rules shall follow - On the basis of the materials on record it cannot be said that GAFTA Rules have not been followed with regard to the appointment of the Arbitrator. This Court is of the view that the objection raised by Mr. Mitra with regard to the maintainability of the petition cannot be accepted. Such objection is overruled. This execution application is held to be maintainable.

Summary

Issues Involved:
1. Maintainability of the execution application for enforcement of a foreign award.
2. Requirement of a declaration for enforceability of the foreign award.
3. Impact of pending civil suit on the execution application.
4. Proper invocation of the arbitration clause.
5. Compliance with GAFTA Rules for the appointment of the arbitrator.
6. Procedural irregularity in the appointment of the nominee arbitrator.

Issue-wise Detailed Analysis:

1. Maintainability of the Execution Application:
The execution application was moved on January 16, 2014, for the enforcement of a foreign award. The petitioner argued that the award is enforceable under Section 47 of the Arbitration and Conciliation Act, 1996, as they had produced the original award and a certified copy of the arbitration agreement. The respondent contended that the court must be satisfied about the enforceability of the award as per Sections 45, 47, and 48 of the Act. The court held that irrespective of the filing of an objection, it is required to decide on the maintainability of the petition.

2. Requirement of a Declaration for Enforceability:
The respondent raised an objection that no prayer for a declaration of enforceability was made in the application, citing a Single Bench decision of the Bombay High Court. The court rejected this objection, emphasizing the legislative intent to ensure the due enforcement of foreign awards and minimize judicial interference.

3. Impact of Pending Civil Suit:
The respondent argued that a pending civil suit between the parties, with observations by the Single Judge and Division Bench that any actions would be subject to the suit's outcome, rendered the execution application premature. The court dismissed this objection, noting that the pending suit did not preclude the enforcement of the foreign award.

4. Proper Invocation of the Arbitration Clause:
The respondent claimed that the arbitration clause, which required an initial attempt at amicable settlement, was not properly invoked. The court found that the invocation of the arbitration clause was valid, as the judgment-debtor failed to respond to the notice of arbitration, and the procedural requirements were met.

5. Compliance with GAFTA Rules for the Appointment of the Arbitrator:
The respondent contended that the appointment of the sole arbitrator did not comply with GAFTA Rules, which required informing the respondent and following specific procedures. The court held that the GAFTA Rules were followed, and the judgment-debtor was given an opportunity to appoint an arbitrator but failed to do so.

6. Procedural Irregularity in the Appointment of the Nominee Arbitrator:
The respondent argued that the nominee arbitrator was appointed outside the provisions of GAFTA Rules, making the award unenforceable. The court rejected this argument, stating that the appointment process was in accordance with the rules, and any procedural irregularities were waived by the judgment-debtor's inaction.

Conclusion:
The court overruled all objections raised by the respondent regarding the maintainability of the petition and held the execution application to be maintainable. The court directed the creation of a fixed deposit of Rs. 1.8 crore in the Bank of Baroda and rejected the respondent's prayer for a stay of the order. The injunction order was to continue until further orders.