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TMI Blog2013 (7) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... MIN Moisture 12 PCT.MAX Vitrious 80 PCT. MIN Broken 3 PCT. MAX Proteine 12 PCT. MIN Foreign Matter 2 PCT MAX Sprouted/Spotted 1 PCT. MAX Soft Wheat 1.5 PCT. MAX Quantity 20,000 MT With 5%+/- Sellers Option in 1 single shipment Shipment 1-30/June 1994 Quantity final at loading Quality, Conditions All final at time and place of loading As per first class Intl Company Cert."S.G.S.", nominated by the buyers certificate and quality showed at the certificate will be the result of an average samples taken jointly at port of loading by the representatives of the sellers and the buyers. Price US Dlrs 162,00 Per M. Ton FOB stowed Kandla, Buyers to give 10 days preadvise of vessels arrival Payment Against 100 PCT L/Credit irrevocable and confirmed for 100 PCT payable at sight against Foll. Shipping docs Other conditions All other terms and conditions not in contradictions with the above to be as per G.A.F.T.A Rules, 64/125 and its successive Amendments (In force at time and place of shipment date) which the parties admit that they have knowledge and notice." 4. The buyers opened a letter of credit (L/C) on 17.06.1994 in favour of the sellers. The sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The sellers' contention that S.G.S. India were nominated by the buyers and they were agents for buyers was rejected. The Arbitral Tribunal, GAFTA, concluded that wheat described on the certificate of quality and condition presented by the sellers as durum wheat of Indian origin was, in fact, soft wheat. The certificate was held to be uncontractual and with regard to description, it was held that sellers were in breach of contract and the buyers were entitled to damages based on the difference between the contract price and the FOB value of the goods as delivered and buyers were also entitled to any further proven loss directly and naturally resulting in the ordinary course of events from the breach. The Arbitral Tribunal, GAFTA passed the final award in the following terms: "We do hereby award that Sellers shall pay Buyers forthwith the sum of US $ 1,023,750.00 (One million twenty three thousand seven hundred and fifty United States dollars) being the difference between the FOB contract price-US $ 162.00 per tonne less US $ 2.00 per tonne penalty for extending the shipment period, i.e. US $ 160.00 per tonne, and the FOB price of the Soft wheat shipped on m.v. "HACI RESIT KALKAV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the GAFTA Rules. As regards this claim also, the Arbitral Tribunal, GAFTA was constituted and an award No. 12159 dated 04.12.1997 came to be passed by the Arbitral Tribunal, GAFTA. 10. From the above two awards, namely, award no. 11715A and award no. 12159, the two appeals being appeal award no. 3782 and appeal award no. 3783 were filed by the sellers before the Board of Appeal. The Board of Appeal disposed of appeal award no. 3782 (arising out of award No. 11715A) on 21.09.1998 and passed the award in the following terms: "We do hereby award that Sellers shall forthwith pay to Buyers the sum of US$ 1,023,750.00 (one million, twenty three thousand seven hundred and fifty United States Dollars) being the difference in value of US$ 48.75 per tonne between the goods supplied and goods of the contractual description calculated on 21,000 tonnes, together with interest thereon at 7% (Seven per centum) per annum from 24th August, 1994 to the date of this Award. We further award that Sellers shall forthwith pay to Buyers the sum of US $ 138,590.28 (one hundred and thirty eight thousand five hundred and ninety United States Dollars and twenty eight cents), being demurrage incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and presenting this case." 12. The sellers challenged the appeal award no. 3782 in the High Court of Justice at London. The appeal was dismissed on 21.12.1998. The sellers did not challenge the award passed by the Board of Appeal in appeal award no. 3783. Both awards, thus, have attained finality. 13. It was then that buyers instituted a suit in the Delhi High Court for enforcement of the awards both dated 21.09.1998 passed by the Board of Appeal in appeal award no. 3782 and appeal award no. 3783. The sellers raised diverse objections to the enforcement of the above awards. 14. The appellant, Shri Lal Mahal Limited, is successor in interest of the sellers while the respondent Progetto Grano SPA is the successor in interest of buyers. When the proceedings were pending before the Delhi High Court, the substitution in the proceedings took place. This is how the parties are now described in the appeal. For the sake of convenience, we shall continue to refer the appellant as 'sellers' and the respondent as 'buyers'. 15. Inter alia, the submission of the sellers before the High Court was that the appeal awards passed by the Board of Appeal which are sought to be enforced are contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court of Justice at London of the Defendant's petition challenging the Appeal Award No. 3782. The above conclusion cannot be held to be contrary to the terms of the contract or to the public policy of India. Further, this Court is not expected in enforcement proceedings, re-determine questions of fact. The grounds enumerated in Section 48 of the Act are meant to be construed narrowly and does not permit a review of the foreign award on merits." 18. Then in paragraph 25 of the impugned judgment, the High Court observed that there was no serious defence in opposition to the enforcement of two foreign awards. The High Court overruled the objections raised by the sellers to the enforcement of foreign awards and held that they were enforceable under Part II of the 1996 Act. 19. We have heard Mr. Rohinton F. Nariman, learned senior counsel for the appellant (sellers) and Mr. Jayant K. Mehta, learned counsel for the respondent (buyers) at quite some length. 20. Having regard to clause (b) of sub-section (2) of Section 48 of the 1996 Act, we shall immediately examine what is the scope of enquiry before the court in which foreign award, as defined in Section 44, is sought to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to say that Arbitral Tribunal, GAFTA in Paris passed an award in favour of General Electric Company (GEC) against Renusagar. GEC sought to enforce the award passed in its favour by filing an arbitration petition under Section 5 of the Foreign Awards Act in the Bombay High Court. Renusagar contested the proceedings for enforcement of the award filed by GEC in the Bombay High Court on diverse grounds. Inter alia, one of the objections raised by Renusagar was that the enforcement of the award was contrary to the public policy of India. The Single Judge of the Bombay High Court overruled the objections of Renusagar. It was held that the award was enforceable and on that basis a decree in terms of the award was drawn. Renusagar filed an intra-court appeal but that was dismissed as not maintainable. It was from these orders that the matter reached this Court. On behalf of the parties, multifold arguments were made. A three-Judge Bench of this Court noticed diverse provisions, including Section 7(1)(b)(ii) of the Foreign Awards Act which provided that a foreign award may not be enforced if the court dealing with the case was satisfied that the enforcement of the award would be contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than contravention of law is required. 66. . . . . . . . . This would mean that "public policy" in Section 7(1)(b)(ii) has been used in a narrower sense and in order to attract the bar of public policy the enforcement of the award must invoke something more than the violation of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression "public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. (Emphasis supplied by us) 23. In Saw Pipes1, the ambit and scope of the court's jurisdiction under Section 34 of the 1996 Act was under consideration. The issue was whether the court would have jurisdiction under Section 34 to set aside an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Senior Counsel requires to be accepted. From the judgments discussed above, it can be held that the term "public policy of India" is required to be interpreted in the context of the jurisdiction of the court where the validity of award is challenged before it becomes final and executable. The concept of enforcement of the award after it becomes final is different and the jurisdiction of the court at that stage could be limited. Similar is the position with regard to the execution of a decree. It is settled law as well as it is provided under the Code of Civil Procedure that once the decree has attained finality, in an execution proceeding, it may be challenged only on limited grounds such as the decree being without jurisdiction or a nullity. But in a case where the judgment and decree is challenged before the appellate court or the court exercising revisional jurisdiction, the jurisdiction of such court would be wider. Therefore, in a case where the validity of award is challenged, there is no necessity of giving a narrower meaning to the term "public policy of India". On the contrary, wider meaning is required to be given so that the "patently illegal award" passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our view in addition to narrower meaning given to the term "public policy" in Renusagar case it is required to be held that the award could be set aside if it is patently illegal. The result would be - award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interests of India; or (c) justice or morality, or (d) in addition, if it is patently illegal Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void. (pgs. 727-728) of the Report, it can be safely observed that while accepting the narrow meaning given to the expression "public policy" in Renusagar3 in the matters of enforcement of foreign award, there was departure from the said meaning for the purposes of the jurisdiction of the Court in setting aside the award under Section 34. 25. In our view, what has been stated by this Court in Renusagar 1994 Supp (1) SCC 644 with reference to Section 7(1)(b)(ii) of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India" occurring in Section 34(2)(b)(ii) in Saw Pipes1 is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b). 28. It is true that in Phulchand Exports (2011) 10 SCC 300 , a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) accepted the submission made on behalf of the appellant therein that the meaning given to the expression "public policy of India" in Section 34 in Saw Pipes1 must be applied to the same expression occurring in Section 48(2)(b) of the 1996 Act. However, in what we have discussed above it must be held that the statement in paragraph 16 of the Report that the expression "public policy of India used in Section 48(2)(b) has to be given a wider meaning and the award could be set aside, if it is patently illegal" does not lay down correct law and is overruled. 29. Having regard to the above legal position relating to the scope of "public policy of India" under clause (b) of sub-section (2) of Section 48, we shall now proceed to consider the submissions of the parties. 30. Mr. Rohinton F. Nariman, learned senior counsel for the appellant, argued that the appeal awards by the Board of Appeal c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... House of Lords in Gill & Duffus[(1984) 1 Lloyd's Law Reports 227] has affirmed the decision in Alfred C. Toepfer6. It was, thus, submitted that the Arbitral Tribunal, GAFTA and the Board of Appeal having disregarded the finality of the certificate issued by S.G.S. India, the awards were plainly contrary to contract and, therefore, not enforceable in India. It was submitted on behalf of the appellant that it was not an issue in dispute and not the buyers' case before the Arbitral Tribunal, GAFTA and/or the Board of Appeal that the procedure adopted by SGS India was not in conformity with the contract. It was, therefore, not open to the Board of Appeal to render a finding which went beyond the scope of the buyers' very case. Accordingly, it was argued that the Board of Appeal dealt with the questions not referred to it and which were never in dispute and, therefore, award cannot be enforced because it is contrary to Section 48(1)(c) of the 1996 Act as well. 33. Learned senior counsel for the appellant highlighted that the real problem in the present case was not that S.G.S. India did not properly certify the goods and/or that they did not meet the contractual specifications provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the certification, firstly, it did not follow the contractual specified mode of sampling in that the contract required the result to be of an average sample taken at the port of loading, not the weighted average of pre-shipment and shipment, secondly, the analysis done by S.G.S. India was doubtful; (e) as the buyers held the sellers to be in breach on the grounds of defective sampling and certification by S.G.S. India, the buyers requested the sellers to attend at discharge for joint sampling which was not accepted by the sellers and (f) the method used for determining soft wheat used by S.G.S. India obviously produced very different results to the methods used by Crepin and other laboratories. On the balance of probabilities, the Arbitral Tribunal, GAFTA found and the Board of Appeal agreed that the wheat described in the certificate of quality and condition was soft wheat and, therefore, buyers were entitled to damages. 37. Learned counsel submitted that the findings recorded by the Arbitral Tribunal, GAFTA and the Board of Appeal were in the realm of interpretation of the contract and appreciation of the evidence which cannot be reopened by arguing that the foreign award is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sellers and the buyers", the Board of Appeal recorded its finding as follows: "The SGS India certificate shows that an inspection took place at the suppliers godowns inland, and representative samples taken. Sealed samples were inspected lotwise and the cargo meeting the contractual specifications was allowed to be bagged for dispatch to Kandla. Continuous supervision of loading into the vessel was also carried out at the port. The samples drawn periodically were reduced and composite samples were sealed; one sealed sample of each lot was handed over to the supplier, one sealed sample of each lot was analysed by SGS and the remaining samples were retained by SGS for a period of three months unless and until instructions to the contrary were given. The analysis section of the certificate states that "The above samples have been analysed and the weighted average Pre-shipment and Shipment results are as under: We find that this procedure was not in conformity with the requirements of the Contract, which required the result to be of an average sample taken at port of loading, not the weighted average of pre-shipment and shipment samples. Accordingly the certificate is uncontractu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of Appeal. If a ground supported by the decisions of that country was not good enough for setting aside the award by the court competent to do so, a fortiori, such ground can hardly be a good ground for refusing enforcement of the award. Accordingly, we are not persuaded to accept the submission of Mr. Rohinton F. Nariman that Delhi High Court ought to have refused to enforce the foreign awards as the Board of Appeal has wrongly rejected the certificate of quality obtained from the buyers' nominated certifying agency and taken into consideration inadmissible evidence in the nature of certificates obtained by the buyers' for the purposes of forwarding contract. 43. Moreover, Section 48 of the 1996 Act does not give an opportunity to have a 'second look' at the foreign award in the award - enforcement stage. The scope of inquiry under Section 48 does not permit review of the foreign award on merits. Procedural defects (like taking into consideration inadmissible evidence or ignoring/rejecting the evidence which may be of binding nature) in the course of foreign arbitration do not lead necessarily to excuse an award from enforcement on the ground of public policy. 44. In what we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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