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TMI Blog2002 (9) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... extend pre-export finance facility to the respondent and advanced an amount of US $5 Million. The respondent agreed to produce and deliver Polyester filament Yarn by 4-11-1996. 4. As per the terms of the above mentioned agreement, the stocks so supplied by the respondent were to be sold by the petitioner to a company known as Sanghi Industries Limited , which is an associate company of the respondent for a price of US $ 5,668,750. It was further agreed that the amount of US $ 688,750 from out of the sale price to be paid by the above mentioned Sanghi Industries Limited would be the profit accruing to the petitioner. 5. As the respondent could not fulfil his obligations as per the terms of the above-referred agreement to deliver the goods by 4-11-1996, the time was extended to 9-12-1996 by a further agreement. In view of the rescheduling the respondent agreed to pay an amount of US $ 611,111.11. Subsequently on 13-2-1997, the respondent in fact paid an amount of US $ 458,333.33 to the petitioner in partial fulfilment of the above mentioned undertaking. The balance amount was withheld, it appears, on the ground that the approval of the Ministry of Finance is required under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncreased in extremis in the Claimant s final submission to U.S. $ 482,222.00) is dismissed. 5.The Defendant is ordered to pay U.S. $ 10,218.76 to the Claimant as out-of-pocket expenses. 6.The Defendant is ordered to pay to the Claimant all the arbitration costs amounting to U.S. $ 26,230.00 as administrative expenses, and U.S. $ 61,317.00 as arbitrator s fees, in addition to U.S. $ 2,444.00 as arbitrator s expenses, totalling U.S. $ 90,000.00, and the normal legal costs of U.S. $101,798.51, according to the proportion set out in section X above. 7.The Tribunal further orders that the Defendant, who has not paid the sum which he is required to have paid as an advance on ICC arbitration costs, shall reimburse the Claimant an amount of U.S. $ 90,000.00. 8.All other Claims and Counter-Claims with regard to the present dispute are dismissed." Apart from that the arbitration costs were also quantified under the award and the Tribunal held that the same should be borne fully by the respondent. 8. It appears that an application was filed by the respondent before the High Court of Justice, Queen s Bench Division, Commercial Court, London, UK, challenging the above mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On Point No. 5, the learned Judge observed that the petitioner could take recourse if so advised to execution proceedings under the Code of Civil Procedure for the enforcement of the foreign award. On Point No. 6, the court-below held that the O.P., is maintainable. 11. Finally, the learned Judge held that in view of the conclusions reached by him on the first six points, held as follows on the seventh point framed by him. "Consequent to my findings on Point Nos. 1 to 6, supra, this Court doth hereby adjudicate upon the O.P., as it did on Point Nos. 1 to 6, supra, and granting costs of the O.P., to the petitioner, and fixing the Advocate Fee, for each side, at Rs. 5,000, and giving liberty to the petitioner, to take separate Execution Proceedings, if so advised, for realization of the monies covered by the present Orders." Though there was a specific claim for interest at the rate of 15% per annum with quarterly rests from the date of the award till the date of the actual payment, the learned Judge did not record any specific finding in this regard. In the background of the above mentioned findings of the learned Judge, these two civil revision petitions are filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the 11th day of October, 1960, ( a )in pursuance of an agreement in writing for arbitration to which the Convention set forth in First Schedule applies; and ( b )in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies." 15. Section 49 of the Arbitration and Conciliation Act, 1996 stipulates that where the Court is satisfied that a foreign award is enforceable under Chapter I the award shall be deemed to be decree of that Court. Section 36 of the Act provides that an award shall be enforced in the same manner as if it were a decree of the Court and shall be enforced under the provisions of the Code of Civil Procedure. However, in the case of a foreign award before the Court decides to enforce the award it must be satisfied that the foreign award is an enforceable award. The parameters to decide whether a foreign award is enforceable or not are prescribed under section 48 of the Act. Section 48 is couched in negative language in the sense that it only indicates that the grounds on which the enforcement ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y fraud or corruption. (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause ( e ) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security." 16. The respondent s case is that the award is unenforceable for the reason that the transaction i.e., the Estisna agreement out of which the whole litigation arises is a transaction of money lending and that the petitioner in substance seeks to recover interest from the respondent for the amount advanced by him. Such recovery of interest is prohibited by Shari a Law- the Law applicable to the said agreement as provided in clause 6(1) of the agreement, which reads as follows : "This EPA, and the construction, performance and validity thereof, shall be governed in all respects of the laws of England. Except to the extent such laws conflict with the Islami Shari a, to which case the latter shall prevail." Thereby attracting the application of section 48(1)( a ) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a ) of the Act is only an agreement of arbitration which is in the form of an arbitration clause in the Estisna agreement and therefore it is not open for the respondent to question the validity of the Estisna agreement in the proceedings under section 49 of the Act. 20. The submission of the learned counsel for the respondent that the expression "agreement" occurring under section 48(1)( a ) of the Act is to be understood as the Estisna agreement entered into between the parties herein, in my view, cannot be accepted, but must be understood to mean only the arbitration agreement which is in the form of the arbitration clause in the Estisna agreement . The reason is that the language of section 48(1)( a ) categorically refers to the agreement referred to in section 44 of the Act. Section 44 defines a foreign award , to mean, an arbitral award in pursuance of an agreement in writing for arbitration on differences between the persons arising out of legal relationship. The only agreement contemplated under section 44 is the agreement in writing for arbitration. The section further clarifies that such a legal relationship may either be contractual or otherwise. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otocol and Convention) Act (Act 6 of 1937). The Supreme Court took note of the fact, that both the above mentioned enactments were made in order to give effect to the obligations arising under the Geneva Convention of 1927 and New York Convention of 1958. The Supreme Court further observed at paragraph 34 as follows : "...It was, however, felt that ... The New York Convention seeks to remedy the said defects by providing for a much more simple and effective method of obtaining recognition and enforcement of foreign awards...." (p. 880) The Supreme Court further held on an analysis of the provisions of the New York Convention that none of the provisions of the Convention postulates a challenge to the award on merits. 23. In fact, the provisions of the New York Convention are embodied in Schedule I of the Arbitration and Conciliation Act, 1996. Articles II and V, read as follows : "Article II 1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )the subject-matter of the difference is not capable of settlement by arbitration under the law of the country; or ( b )the recognition or enforcement of the award would be contrary to the public policy of that country." A comparison of these two articles and the Scheme of sections 44 and 48 and the language of sections 44 48 of the Arbitration and Conciliation Act, 1996, which are substantially a reproduction of articles II and V of the New York Convention, makes it clear that the Parliament while enacting sections 44 and 48 of the Act virtually was giving effect to the provisions of the above mentioned two articles of the New York convention and leaves no further doubt in my mind that the agreement contemplated under section 48(1)( a ) of the Act is only the agreement to have the disputes resolved by arbitration. 24. Even for the sake of argument the respondent s submission that agreement referred to under section 48(1)( a ) of the Act is the primary agreement which created the legal relationship between the parties thereto i.e., Estisna agreement in the present case and that such an agreement is contrary to the Islamic Law of Shari a is to be accepted, the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate execution petition for the enforcement of the award in question is clearly wrong in view of the law laid down by the Supreme Court in Fuerst Day Lawson Ltd.s case ( supra ). In the said case, their Lordships held that there is no need to take separate proceedings, one for deciding of the enforceability of the award and the other to take up the execution thereafter. "....The only difference as found is that while under the Foreign Award Act a decree follows, under the new Act the foreign award is already stamped as the decree. Thus, in our view, a party holding foreign award can apply for enforcement of it but the Court before taking further effective steps for the execution of the award has to proceed in accordance with sections 47 to 49. In one proceedings there may be different stages. In the first stage the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the Court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again. If the object and purpose can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )period during which the arbitration proceedings were pending before the arbitrators; ( iii )period from the date of award till the date of institution of proceedings in a court for enforcement of the award; ( iv )period from the date of institution of proceedings in a court till the passing of the decree; and ( v )period subsequent to the decree till payment. 135. The interest in respect of the period covered by item ( i ), namely, prior to the date of reference to arbitration would be governed by the proper law of the contract and the interest covered by items ( ii ) and ( iii ), i.e., during the pendency of the arbitral proceedings and subsequent to the award till the date of institution of the proceedings in the court for the enforcement of the award would be governed by the law governing the arbitral proceedings. These are matters which have to be dealt with by the arbitrators in the award and the award in relation to these matters cannot be questioned at the stage of enforcement of the award. At that stage the court is only required to deal with interest covered by items ( iv ) and ( v ). The award of interest in respect of these periods would be governed by lex f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , section 31 of the Act deals with the form and content of the arbitral awards. Sub-section (7) thereof deals with the interest, which read as follows : "(7)( a ) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. ( b ) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment." A reading of sub-section (7)( b ) of section 31 of the Act makes it clear that the interest must be payable on the sum directed to be paid by arbitral award shall carry interest at 18 per cent per annum from the date of the award till the date of the payment unless the award itself expressly denies such interest. Therefore, sub-section 7 of section 31 of the Act becomes lex fori in the present case. Nothing is brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferred, may direct that the person disobeying the order be detained in the civil prison for a term not exceeding three months unless before the expiry of such term the Court directs his release." and therefore the Court-below should have issued a direction in this regard as prayed for. 35. In the result, the civil revision petition filed by the petitioner is allowed and the civil revision petition filed by the respondent is dismissed. 9th September 2002 : 36. After the judgment is delivered, the learned counsel for the petitioner - Sri P. Sri Raghuram submitted that during the pendency for both the O.P., as well as these civil revision petitions there was an interim direction to the respondent not to alienate the petition schedule property. This is not disputed by the learned counsel for the respondent. The learned counsel for the petitioner therefore submitted that in view of the judgment pronounced now as the petitioner is entitled to proceed with the execution of the award in the same original petition, which is the subject-matter of the present civil revision petitions the interim orders granted earlier may be continued. 37. Heard the learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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