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2006 (5) TMI 472 - SC - Companies LawWhether HCL could not effectively present its case before the ICC arbitrator and therefore enforcement of the ICC award should be refused in view of section 48 (1)(b) of the Arbitration and Conciliation Act 1996?
Issues Involved:
1. Validity of two-tier arbitration under the Arbitration and Conciliation Act, 1996. 2. Nature of the ICC arbitrator's role (whether appellate or not). 3. Classification of the ICC award as a foreign award. 4. Adequacy of opportunity for HCL to present its case before the ICC arbitrator. Issue-wise Detailed Analysis: Issue No. 1: Validity of Two-Tier Arbitration The court examined whether the second part of Clause 14 of the agreement, which provided for a two-tier arbitration, was valid and permissible under the Arbitration and Conciliation Act, 1996. Both the Division Bench and the learned Single Judge had previously held that such an agreement was valid. The court noted that two-tier arbitration was permissible under both the 1899 and 1940 Acts, citing cases like Hiralal Agarwalla v. Jokin Nahopier & Co., Fazalally Jivaji Raja v. Khimji Poonji & Co., and M.A. & Sons v. Madras Oil & Seeds Exchange Ltd. The court found no prohibition in the 1996 Act against two-tier arbitration, emphasizing that the parties' autonomy to contract as they desire should not be curtailed by Section 34 of the Act. The court concluded that the two-tier arbitration agreement was valid and permissible in India, and it did not violate public policy. Issue No. 2: Nature of the ICC Arbitrator's Role To determine whether the ICC arbitrator acted in an appellate capacity, the court closely examined Clause 14 of the agreement. The clause allowed for arbitration in India and, if either party disagreed with the result, an appeal to a second arbitrator in London under the ICC rules. The court emphasized the significance of the word "appeal" in the clause, indicating that the ICC arbitrator was intended to act as an appellate forum. The ICC arbitrator's award explicitly stated that the first award was wrong, further supporting the appellate nature of the second arbitration. The court concluded that the ICC arbitrator did act in an appellate capacity, overturning the Division Bench's finding that the second arbitration was not an appeal. Issue No. 3: Classification of the ICC Award as a Foreign Award The court addressed whether the ICC award was a foreign award under Section 44 of the Act. The learned Single Judge had held it to be a foreign award, while the Division Bench disagreed. Section 44 defines a foreign award based on three conditions: commercial relationship, written agreement, and award made in a convention country. The court found that all these conditions were met in this case. The Division Bench had relied on the phrase "unless the context otherwise requires" to argue that the award was domestic due to the governing Indian law. However, the court distinguished this case from previous rulings under the repealed Foreign Awards (Recognition and Enforcement) Act, 1961, noting that the 1996 Act deliberately omitted a similar provision. The court concluded that the ICC award was indeed a foreign award, as the conditions under Section 44 were satisfied. Issue No. 4: Adequacy of Opportunity for HCL to Present Its Case Under Section 48(1)(b) of the Act, enforcement of a foreign award can be refused if the party against whom it is invoked was unable to present its case. The court examined whether HCL had a fair opportunity to present its case before the ICC arbitrator. Despite HCL's initial refusal to participate, the court noted delays in the proceedings not attributable to HCL and the impact of the 9/11 terrorist attacks on communication. The court found that the ICC arbitrator's refusal to consider materials submitted by HCL after a certain date was based on a technicality and that HCL did not receive a fair hearing. Consequently, the court set aside the ICC award and remitted the matter back to the ICC arbitrator for fresh disposal, directing that a new award be passed within three months. Conclusion: The court disposed of both appeals, setting aside the judgments of the Division Bench and the learned Single Judge of the Calcutta High Court. The matter was referred to a larger Bench for further consideration due to the difference of opinion among the judges.
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