9911796707
TMI Blog2001 (8) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... was sent to the appellant but without any result. On 25-2-1991, another contract [bearing No. S-336] was proposed by the respondent to the appellant for supply of 2,000 MT of aluminum rods @ 500 MT per shipment. In the first contract, initially there was no arbitration clause. However, on 18-3-1991, the contract bearing the same number, i.e., S-142, was sent containing the arbitration clause with certain amendment for signature and return of the second copy. But the contract was not signed and sent by the appellant. On the basis of certain irrevocable letters for credit for US$ 243,250 opened by the appellant, shipments were made in January, February and March 1991. In the meanwhile, a circular was issued on 19-3-1991 by the Reserve Bank of India 'RBI' to all scheduled commercial banks placing restrictions on import of goods. It was followed up by another letter of the same date addressed by the Executive Director, RBI to the Chairmen of all commercial banks explaining the circular dated 19-3-1991 in relation to the foreign exchange reserve. On 22-4-1991, one more circular was issued by the RBI modifying the margins for opening letters of credit as prescribed by circular dated 19- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be enforced if it is in pursuance of an agreement in writing for arbitration to which the Convention set forth in the Schedule to the Act applies as per section 2(a) of the Act and inasmuch as the Schedule pertains to the Convention on the recognition and enforcement of foreign arbitral awards, otherwise known as the New York Convention. It is submitted that the arbitration in the present case is not pursuant to an agreement in terms of article II of the Schedule to the Act. Shri Venugopal submitted that an agreement has to be in writing under which the parties undertake to submit to arbitration any differences which have arisen in respect of any legal relationship arising out of a contract or otherwise and capable of settlement by arbitration and the expression 'agreement in writing' would include an arbitral clause in a contract or an arbitration clause signed by the parties or contained in the exchange of letters or telegrams. He submitted that in the present case there being no written contract either in contract bearing No. S-142 or contract bearing No. S-336 because the contracts were signed by the respondent but not signed by the appellant and thus resulting only an oral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration clause. In those circumstances, the Court granted enforcement to award No. 2912 which was based on the contract signed by the parties, but found that no valid arbitration agreement under the Convention had been concluded as to the further two contracts and, therefore, denied enforcement to the other two awards pertaining to the rest of the two contacts. Shri Venugopal next relied upon the decision of the Swiss Court in Gaetano Butera (Italy) v. Pietro e Romano Pagnan (Italy) [Yearbook Commercial Arbitration, Vol. IV 1979, p. 296]. The Court of Appeal considered that the validity of the arbitration clause has to be determined by the Italian law under which the clause would have had to be in writing. But on appeal against the decision of the Court of Appeal, the Supreme Court stated that no valid agreement existed because the terms of the New Year Convention had not been applied. It was noticed therein that the arbitral clause was inserted in writing in the contract of sale and was completed by the reference to the arbitration rules of the LCTA. This reference was not a reference, which is invalid according to Italian case law. In the case under consideration, however, the arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned senior advocate appearing for the respondent, submitted that this contention is not available to the appellant inasmuch as the Bombay High Court had already decided the case when a suit had been filed by the appellant and that the conclusion reached by the Bombay High Court while dismissing the suit treating the same as an application filed under section 33 of the Arbitration Act, amounts to res judicata and, therefore, it is not open to the appellant to urge that point again in these proceedings. He further submitted that the correspondence between the parties and the conduct of the appellant clearly establish that there existed an arbitration clause between the parties and, therefore there was full compliance with article II, paras 1 and 2 of the Convention which forms part of the Schedule to the Act. He submitted that the definition of what constitutes a written arbitration agreement given in article II(2) can be deemed to be an internationally uniform rule which prevails over any provisions of municipal law regarding the form of the arbitration agreement in those cases where the Convention is applicable. The courts in the contracting states have generally affirmed the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch but there is certain correspondence which indicates a reference to the contract in opening the letters of credit addressed to the Bank to which we shall presently refer to. There is no correspondence between the parties either disagreeing with the terms of the contract or arbitration clause. Apart from opening the letters of credit pursuant to the two contracts, the appellant also addressed a telex message on 23-4-1990 in which there is a reference to two contracts bearing Nos. S-142 and S-336 in which they stated that they want to invoke force majeure and the arbitration clauses in both the contracts which are set forth successively and thus it is clear that the appellant had these contracts in mind while opening the letters of credit in the bank and in addressing the letters to the bank in this regard. May be, the appellant may not have addressed letters to the respondent in this regard but once they state that they are acting in respect of the contracts pursuant to which letters of credit had been opened and they are invoking the force majeure clause in these two contracts it obviously means that they had in mind only these two contracts which stood affirmed by reason of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of conduct between the parties can be spelt out that such an agreement in writing is enough and he further submitted that para 2 of the article II only explains the meaning of the expression 'agreement in writing' which includes contracts or agreements signed by parties or contained in exchange of letters or telegrams. If really, as contended by Dr. Singhvi, the position is clear, then there is no need for para 2 of article II at all. Para 1 of article II would have been enough. When the expression 'agreement in writing;' is sought to be explained and indicates that it may be in the nature of a contract then obviously the parties have got to sign the same or it may be in the nature of exchange or letters or telegrams, an agreement similarly signed by the parties or resulting as a consequence of exchange of letters or telegrams. Therefore, when the position is not that clear, we would not wish to hazard a decision on this aspect of the matter but rest our conclusion on the principal applicable to the facts emerging in the case and not widen the scope of consideration in this case. 9. Shri Venugopal next contended that the decision in the arbitration suit No. 2963 of 1991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the existence, validity or effect of an arbitration agreement can be determined by the court at three stages: (1) before the arbitration proceedings commence, (2) during their pendency, and (3) after the award is made and filed in the court. If that is so and the question is this regard was raised before the court in a proceeding and that aspect was determined by the court, it cannot be said that such decision is not binding on the parties. Independent of application of the principle of res judicata, we have arrived at the conclusion that we can spell out the existence of an arbitration clause between the parties in terms of the New York Convention to result in an arbitration and that further gets reinforced by the decision of the High Court in the original suit inasmuch as that High Court took the view that there is an arbitration agreement between the parties which is enforceable. 10. In the light of this discussion, we are firmly of the view that the appellant cannot any longer challenge the existence of an arbitration agreement between the parties and such an agreement was not covered by the New York Convention. 11. This Court in Renusagar Power Co. Ltd.'s case (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 'pubic policy', it is construed to mean the doctrine of public policy as applied by the courts in which the foreign award is sought to be enforced and this Court referred to a large catena of cases in this regard. Therefore, we will proceed on the basis that the expression 'public policy' means pubic policy of India and the recognition and enforcement of foreign award cannot be questioned on the ground that it is contrary to the foreign country public policy and this expression has been used in a narrow sense must necessarily be construed as applied in private international law which means that a foreign award cannot be recognised or enforced if it is contrary to (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality, Shri Venugopal strongly attacked the correctness of the conclusions reached by the Arbitrators on the effect of force majeure clause. In the award it is stated: "... Under the force majeure clause the respondents did not have the right to cancel April 1991 and May 1991 quota under contracts S142 and S 336 and neither by the same reasoning did the seller have the right to close out the June through November 1991 quotas again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided no time limit to the suspension of the contract caused by conditions envisaged herein though unusual it was accepted that the earlier contracts would be negotiated and executed successfully by the parties to the dispute. 14. The view taken by the arbitrators on the effect of the force majeure clause in the light of the RBI directives is a plausible view and cannot be ruled out as impossible of acceptance, and, therefore, question of substituting our view for that of the arbitrators would not arise. Question of public policy would have arisen if there was complete restriction on the implementation of the terms of the contract. There was no such restriction imposed. But, on the other hand, certain restrictions were imposed which could have been worked out by resorting to appropriate measures in terms of the contract as held by the arbitrators. In that view of the matter, we do not think any question of public policy as such arises for consideration in a situation of this sort. The argument is almost a red-herring and does not constitute a valid reason for interference with the award. Therefore, we reject the contentions raised on behalf of the appellant. 15. It is lastly c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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