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TMI Blog2019 (2) TMI 1288X X X X Extracts X X X X X X X X Extracts X X X X ..... same was intrinsically linked to the question of enforceability of the subject foreign awards. In any case, all contentions available to the petitioner in that regard could and ought to have been raised specifically and, if raised, could have been examined by the Court at that stage itself. We are of the considered opinion that the scheme of Section 48 of the Act does not envisage piecemeal consideration of the issue of maintainability of the execution case concerning the foreign awards, in the first place; and then the issue of enforceability thereof. Whereas, keeping in mind the legislative intent of speedy disposal of arbitration proceedings and limited interference by the courts, the Court is expected to consider both these aspects simultaneously at the threshold. Taking any other view would result in encouraging successive and multiple round of proceedings for the execution of foreign awards. We cannot countenance such a situation keeping in mind the avowed object of the Arbitration and Conciliation Act, 1996, in particular, while dealing with the enforcement of foreign awards. For, the scope of interference has been consciously constricted by the legislature in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly, 2011, invoked the arbitration clause and eventually appointed Mr. R. Barber as its Arbitrator. As the petitioner failed to respond, the respondent requested GAFTA to appoint an arbitrator on their behalf in accordance with GAFTA Arbitration Rules 125. GAFTA duly appointed Mr. R. Eikel as the second Arbitrator on 22nd September, 2011. On 25th June, 2012 GAFTA appointed Mr. C. Debattista as the third Arbitrator and Chairman of the Tribunal. 3. The respondent filed its claim submissions dated 11th May, 2012 in the two independent arbitration proceedings, concerning contractI and contractII, respectively. These claim submissions came to be filed after giving various opportunities to the petitioner. Resultantly, the Arbitral Tribunal passed two separate awards in relation to the concerned contracts, being Arbitration Case No.14/456 (pertaining to contractI) and Arbitration Case No.14/457 (pertaining to contractII). Be it noted that the Arbitral Tribunal proceeded exparte against the petitioner as, despite notice, the petitioner refused to participate in the arbitration proceedings. Neither did it file any statement of defence or counterclaim nor did it adduce any evidence. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arbitration clause has not been properly invoked. It is submitted that arbitration clause is a two tier clause. Before the arbitration clause could be invoked, the parties are required to first make an attempt to amicably settle their disputes and only upon failure, the parties could refer their disputes to the arbitration as per GAFTA clause for rice and arbitration rules 125. It is submitted that there is no averment in the petition that before invoking the arbitration clause there was any attempt to settle the disputes amicably. Since this stage has not been reached, the invocation of Arbitration Clause is void ab initio. In this regard, the learned Senior Counsel has referred to an unreported decision of a single Bench of this Court in AP 112 of 2008 [Waidhan Engineering Industries Private Limited vs. The Board Of Trustees For The Port Of Kolkata] decided on 5th May 2010. The fourth objection is that even if it is assumed for the sake of argument that this amicable settlement was not followed, even then Rule 3.1 was not followed with regard to the appointment of the sole Arbitrator. It is submitted that it was incumbent upon the decree holder to inform the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation) before proceeding to formally commence the reference? vi) Whether the executing Court can assume jurisdiction without there being a declaration as to the enforcement of the foreign award? vii) Whether the execution of the foreign award was premature before the outcome of the civil suit filed by the appellant? viii) Whether the invocation of the arbitration clause was properly done by the awardholder? ix) Whether the Arbitral Tribunal rightly applied the rules, principles and practice of GAFTA Arbitration Rules while delivering the foreign award? x) Whether an award holder can seek to apply for execution of a foreign award without first complying with the conditions laid down in Section 48 of the 1996 Act? xi) Whether a foreign award can be said to be enforceable merely upon production of original award and a duly certified copy of the arbitration agreement? xii) Whether it is necessary to file a formal application under Section 48 of the 1996 Act to resist the foreign award or objections as to the enforceability of a foreign award can be made even otherwise? xiii) Whether recourse to Section 49 of the Arbitration Conciliation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court failed to appreciate the purport and the scope of the Arbitration Conciliation Act, 1996 and misdirected itself in law and in fact. i) For that the High Court failed to appreciate that the impugned order will cause create hardship and inconvenience and would affect the daytoday business of the petitioner. j) For that the High Court erred in holding that sufficient opportunity was given to the petitioner to deal with the maintainability of the execution proceeding. 6. The aforementioned special leave petition came to be dismissed on 27th February, 2015. Similarly, the special leave petition filed by the petitioner, being SLP(C) No.6682 of 2015 (pertaining to contractII involving similar questions and grounds), was dismissed on 17th August, 2015. 7. Later on, when the matter proceeded before the Single Judge of the High Court in the execution petition, the Court noted that it had already held in its earlier order dated 4th December, 2014, that the subject foreign awards were deemed to be decrees and hence enforceable, whilst rejecting the objections of the petitioner in both the cases with regard to the maintainability of the execution petition. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the award holder. (d) However, as soon as the 90% payment was released by the petitioner, as agreed between the parties, the award holder refused to send its representative for joint inspection and finalization of the claim and allegedly claimed that the inspection held at loading port was final and with an intent to deceive and/or to perpetrate fraud on the petitioner demanded the balance 10% amount of the bill of exchange. (e) The award holder made a suggestion as to a fact that if the petitioner accept the Bill of Exchange for the inferior quality of goods and pays 90% of the bill amount, it will depute its representatives for joint inspection and the balance 10% will be settled after such joint inspection and finalization of the claim, which was not true and which the award holder did not believe it to be true. (f) The award holder with an intent to deceive the petitioner procured the purported award in respect of 2.22% of the total amount due under the three consignments actively concealing that it has neither raised any invoice on the petitioner for all the three consignments nor did it make any claim under the subsisting Letters of Credit through which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the purported award holder be refused and/or the same should be held as unenforceable. 76. Without prejudice to the aforesaid and/or in addition thereto, the purported award is not enforceable, interalia, on the following grounds:A1 The contract between the parties dated 25th October 2010 provides as follows: All other terms and conditions not in contradiction with the above as per GAFTA 48 Arbitration as per GAFTA 12 in London. ARBITRATION All disputes in connection with this contract or the execution thereof shall be settled amicably by friendly negotiations between the two parties. If no settlement can be reached, the case in dispute shall then be submitted GAFTA, LONDON for arbitration as per GAFTA clause for rice and amendment if any and Arbitration Rule 125 . A copy of the GAFTA 125 is annexed hereto and marked OO . A copy of the GAFTA No.48 is annexed hereto and marked PP . A2. On a perusal GAFTA No.48, it is apparent that it is a standard form of contract to be filled up in detail and is to be signed by the parties. In the instant case, the petitioner did not sign any contract with the award holder in GAFTA No.48. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the agreement between the parties and is not and cannot be binding on the petitioner. C3. Since the Arbitrator on behalf of the petitioner was not appointed in accordance with the procedure agreed, the composition of the arbitral tribunal was not in accordance with the agreement of the parties and the purported award cannot be enforced and its enforcement should be refused. D1. The purported award provides that 6.20 : The Tribunal THEREFORE FINDS THAT Buyers, with respect to Cl.6.1 of the GAFTA Sampling Rules No.124 were obliged to provide a certificate of analysis latest 14 days after that message dated 5 February 2011, therefore, latest 20 February 2011. 6.21: The date of default shall therefore, be one day later, the 21 February, 2011 and SO WE DO FIND . D2. The GAFTA Arbitration Rules provide that a claimant can give a notice of his intention to refer a dispute to arbitration within the time limits prescribed therein. In the case of non-payment of amount, a Notice of Reference cannot be issued beyond 60 days from the date the dispute has arisen. A claimant can initiate arbitration proceeding or appoint an Arbitrator before expiry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order dated September 9, 2011 was passed by an Hon ble Single Judge directing that any action taken by the parties to the suit shall be subject to and abide by the result of the suit. The said order was upheld by the Hon ble Division Bench dismissing the Cross Objection by the Award holder. The suit is still pending. The award holder did not challenge the order dated September 28, 2012 passed by a Division Bench of this Hon ble Court dismissing both the appeals and the two cross objections. Having not done so, the award holder accepted that the observations made by the learned Single Judge to the effect that any action taken by the parties to the suit shall be subjected to and abide by the results of the suit would affect the enforcement of any award, which would be passed by the Arbitral Tribunal. G2. In the premises, the purported award did no and could not attain finality and hence not yet enforceable. 8. The learned Single Judge of the High Court (Executing Court) was once again called upon to consider the objections regarding enforceability of the subject foreign awards. At the outset, it has noted that such a challenge was not maintainable after the rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere devoid of merit and thus rejected the same. 9. Aggrieved, the petitioner has once again approached this Court by way of the instant special leave petitions, broadly reiterating the objections taken before the High Court. In that, the subject foreign awards are vitiated by fraud; the awards are contrary to the terms of the contract and thus violative of Section 28(3) of the Act; the Arbitral Tribunal has considered an issue in respect of which there is no preexisting dispute; the Arbitral Tribunal has made out a new case which was not even made out by the claimant in the statement of claim; the subject foreign awards are not supported by reason and are in violation of natural justice and in contravention of the fundamental policy of Indian law; and the Executing Court considering the application under Section 48 of the Act has acted as a First Court of appeal and assumed powers under Order 41 Rule 33 of CPC and sustained the arbitral award by supplying new reasons and facts, which is not the basis on which the impugned awards have been passed. 10. The respondent, on the other hand, has urged that the application filed by the petitioner was not maintainable as it was hit by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 3rd June, 2011 sent from the respondent bank to the petitioner bank and the subsequent correspondence between the parties to which reference has been made by the Arbitral Tribunal while deciding the matter. There is no allegation that the respondent concealed the stated correspondence between the parties with a view to obtain an arbitral award through fraud. The specific ground taken by the petitioner was that the award holder, with intent to deceive, perpetuated fraud on the petitioner. That is not enough to hold that the subject foreign awards were unenforceable within the meaning of Section 48 of the Act. The petitioner had sufficient notice of the arbitration proceedings but it chose not to participate in the said proceeding for reasons best known to it. Therefore, now it cannot turn around and make a grievance about nonconsideration of any document. More so, the grievance is in the nature of inviting the Executing Court to have a second look at the award which is not the scope of Section 48 of the Act. The respondent has also refuted the ground urged on behalf of the petitioner regarding awarding of compound interest at the rate of 4% per annum calculated at quarterly rests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing more. It is an argument in desperation only to protract the execution of the foreign award on untenable grounds. Indeed, the petitioner had not filed any formal application to raise the issue of maintainability of the execution case but the Court had permitted the petitioner to orally urge all available grounds . The learned Judge had then reproduced the five points, which alone were orally urged on behalf of the petitioner through its counsel, as extracted in paragraph 4 above. The High Court examined the said grounds which, obviously, were transcending in the realm of enforceability of the subject foreign awards. In the special leave petitions filed before this Court, the petitioner had articulated questions of law and the grounds also in reference to the scope of Section 48 of the Act which included the enforceability of the subject foreign awards. That can be discerned from the close reading of Questions and Grounds in the previous SLPs, reproduced in paragraph 5 above. Additionally, the learned Single Judge of the High Court vide order date 17th March, 2015 had made it amply clear that the subject foreign awards were deemed to be decrees, which presupposes that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deposited amount, the petitioner lost no time in changing the name of the company within three days thereafter on 23rd April, 2018. The petitioner also changed its registered office address on 26th April, 2018 and had no compunction in moving the NCLT, Kolkata on 27th April, 2018 to prevent the respondent from enjoying the fruits of the subject awards, and saying so brazenly in the petition filed by it under Section 10 of the I B Code. Strikingly, attention of this Court was invited to these facts by the respondent by moving a formal application. The petitioner has not offered any explanation, much less a plausible one. On this count also, the special leave petitions deserve to be rejected. 16. Having said this, we do not wish to examine any other argument of the petitioner, including on merits of the enforceability of the subject foreign awards. Even if we were to do so, we would have agreed with the High Court that the grounds urged by the petitioner to question the enforceability of the subject foreign awards are untenable, not being within the purview of Section 48 of the Act. Be that as it may, we find that the High Court has considered every aspect of the grounds urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters and poisonous weed seeds. Rice must be free from insect infestation and shall have the following specification . i) Moisture (Maximum): 13 PCT ii) Broken Grains (Maximum): 15 PCT (Rice size of 3/4th and below will be considered as broken and less than 1/4th Broken should not be more than 2 percent iii) Foreign Mater (Maximum) : 0.3 Percent iv) Dead, Damaged and Discoloured Grains (Maximum): 3 Percent in Total iv) Radio Activity (Maximum) : 50 DO/KG 01 737 SC/134 CS (Relaxable for the Crop of SAARC and SouthEast Asian Country) 6.6 In relevance to this dispute and under consideration of the Quality Clause of the Contract, same was amended on 7th December 2010 and altered: 2. Specifications: Clause II to be amended to 17 Pct Max I/0 15 Pct. Clause IV to be amended to 6 Pct. Max I/0 3 Pct in Total. All other specifications will be remain unchanged. 6.7 Three partial shipment had been performed by claimants as follows: 1. 1,610.00 mt on board of MV Sturdy Falcon on 27th December 2010 2. 3,430.00 mt on board of MV Genius Mariner on 31st December 2010 3. 8,689.55 mt on board of MV Tuman Gang (sic) on 17th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 In reference with the balance of USD 10.00 per metric ton for each partial shipment, as agreed under the Amendment dated 7th December 2010, the Amendment Provided that the Balance amount@ US$10.00 per MT will be payable after receipt of quality inspection report of destination port . 6.16 This indeed establishes an alteration to the original provision of the Contract that the quality would be final at the port of loading, at least as far as the balance of USD 10.00 per metric ton is concerned. On interpretation and construction of the Contract itself and its Amendment dated 7th December 2010, the Tribunal notes that the Amendment itself defines in 1. Quantity that the weight in accordance with the Contract would be still final at loading while the amended payment term now states that a balance amount of US$ 10.00 per MT would only be payable after receipt of a quality inspection report of destination port. 6.17 WE THEREFORE FIND THAT the Contract had been validly altered to the provision that Sellers could only have triggered payment of the balance of USD 10.00 per metric ton after presentation of a quality inspection report from the port of destination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay any sum to Sellers. 2) Sellers claim for the balance of as deducted from the invoice in reference to the shipment on board of MV Tuman Gang amounting to USD 382,348.90 succeeds. Interest to run from 20th February 2011, the date by which Buyers should have provided a quality inspection report at destination port . Buyers shall pay compound interest on the above sum of USD 137,148.20 at the rate of 4% (four per cent) per annum calculated at quarterly rests, from 29th June 2011 to the date of payment. 7.2 Buyers shall forthwith pay to Sellers USD 382,348.90 (three hundred eighty two thousand, three hundred and forty eight United States dollars and ninety cents). Buyers, shall forthwith pay to sellers USD 332,348.90 at the rate of 4% (four percent) per annum calculated at quarterly rests, from 20th February 2011 to the date of payment. 7.3 WE THEREFORE AWARD THAT Buyers shall pay the fees, costs and expenses of this arbitration as per the attached schedule. 17. Suffice it to observe that the Arbitral Tribunal has considered all aspects of the matter and even if it has committed any error, the same could, at best, be a matter for correction by w ..... 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