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TMI Blog2012 (7) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... Retd.) and Mr. Justice J.K. Mehra (Retd.), is unenforceable against the petitioners. A declaration is also sought that the demand letter dated 22.08.2005, for ₹ 1,24,427,492/- issued by respondent No. 1 is unenforceable against the petitioners. The petitioners also seek stay of the operation of the aforesaid partial award dated 31.03.2005, and of the aforesaid demand letter dated 22.08.2005. 2. The petitioner Nos. 1 and 2 in O.M.P. No. 223/2006 are Public sector Companies, engaged in the business of purchase of crude oil for the purpose of refining and selling the refined petroleum products. 3. Respondent No. 1, i.e. M/s Videocon Industries Ltd. (in both the Petitions- which is also the contesting Respondent), is a company incorporated in India and engaged in business of, amongst others, exploration and exploitation of hydrocarbons. 4. The case of the petitioners is that the Government of India, being the sole owner of natural resources, entered into a Production Sharing Contract (PSC) dated 28.10.1994 with ONGC, Videocon Petroleum Ltd., Command Petroleum (India) Ltd. (now known as Cairn Energy), and Ravva Oil (Singapore) Ltd., collectively referred to as the contractor, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 34 of the Act, Section 48 does not provide for or permit a challenge to a foreign award in Courts in India. A party can only resist the enforcement of a Foreign Award, as and when it is sought to be enforced. The Respondent submits that no Petition under Section 48 can be filed, unless the person who has succeeded in the arbitration seeks enforcement of the Award. It is at that point of time that the successful party may be said to have 'invoked' an award against the unsuccessful party, and it is that invocation of an Award that gives rise to a cause of action for filing an application under Section 48 of the Act. It is argued that the respondents No. 1 & 2 have not yet invoked the partial award dated 31.03.2005. Consequently, this petition under Section 48 is not maintainable. 14. Before I proceed to further record and discuss the respective submissions of the parties, I consider it appropriate to take note of the relevant provisions of the Act. Section 46 of the Act states: "46. When foreign award binding. - Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place ; or (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the Court finds that- (a) the subject -matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation.----Without prejudice to the generality of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (3) If an application for the setting aside or suspension of the award has been made t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances where an Award has been held to be enforceable under Part II of the Act. 20. It is further submitted that the question of when a Foreign Award is considered to be enforceable under the Act has been addressed in Section 49 of the Act which states that "where the Court is satisfied that the Foreign Award is enforceable under this Chapter, the Award shall deemed to be a decree of that Court". 21. Therefore: (a) The decision - whether an Award is enforceable or not, is entirely within the Court's domain; b) It is only upon such satisfaction being reached by the Court, that a Foreign Award is enforceable; c) In order to attain such satisfaction, the Foreign Award must go through the process envisaged under "this chapter" i.e. Chapter I of Part II, which includes Sections 44 to 52,at the end of which, the Court must be satisfied that the Award is enforceable. 22. It is argued that where a Foreign Award is enforceable under Chapter I of Part II of the Act, the same would be deemed to be a decree of the Court and could be relied upon by way of defence, set off or otherwise in any legal proceedings in India. 23. Conversely, if a Foreign Award has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dal Drugs Ltd. v. Noy Vallesina Engineering SpA and others, 2002 (2) Arb L.R. 323 (Bombay), wherein the Court observed: "8. Insofar as the challenge to a foreign Award is concerned the scheme of the Act appears to be that, the remedy that is available to a person against whom that Award has been made is to wait till the person in whose favour the Award is made moves under Section 48 of the Act for enforcement of the award and it is then that such a person can challenge the validity of the Award on the grounds which are mentioned in Section 48 of the Act." (emphasis supplied) (iv) Vikrant Tyres Ltd. and Anr. v. Techno Export Foreign Trade Company Ltd. 2005 (Supp) Arb. LR 454 (Karnataka), wherein the Court observed: "41 .... However from the scheme of Section 48 it could be said that no application as a pre-emptive step could be filed to resist execution even before any such application for execution of the award is made in that behalf Therefore, the application filed by the Plaintiff under Section 48 is premature and not maintainable." (emphasis supplied) 26. Learned senior counsel for respondent no.1 thus concludes that an enforcement petition is a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom enforcement/execution proceedings have been initiated in a Court, would be to add/supply words to the said provision. 31. Meaning of "invoke" is "appeal to as an authority or in support of an argument" (Oxford Tenth Ed.) and "enforce" means "compel compliance with (a law, rule or obligation); cause to happen by necessity or force". 32. Thus the use of the word 'invoke' in section 48 in contradistinction to "enforce" shows that the Legislature did not intend the initiation of an enforcement/execution proceeding as a condition precedent for raising the issue of non-enforceability of a foreign award by the unsuccessful party. 33. Further, the term "enforcement of award" has been held not to mean merely execution of that award as a decree, but it also includes using that award as defence in legal proceedings for claiming set off on the basis of that award, etc. Execution of the foreign award as decree is only one facet of enforcement. Thus, enforcement of a foreign award is a wider term than execution of the award. 34. Reliance is placed on Pratabmull Rameshwar Vs. KC.Sethia, AIR 1960 Cal 702, wherein it was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement is null and void. This read in conjunction with the right of appeal given under Section 50 and the power of the arbitrator to rule on his own jurisdiction clearly shows the intent of the legislature to avoid delay which would be inevitable if it has to be a final decision and it would defeat the object of soon placing all material before the Arbitral Tribunal. I am afraid that this cannot be accepted as the real purpose of Section 48 is to ensure that at some stage Whether pre-award, post-award or both, a judicial authority must decide the, validity, operation, capability of performance of the arbitration agreement...." (emphasis supplied) 38. Reliance is also placed on Venture Global Engineering Vs. Satyam Computers, 2007 (3) RAJ. 128 (AP), wherein it was held that : "A conjoint reading of section 36 and 34 reveal that Section 36 deals with the enforcement of the Arbitral Award and Section 34 provides for the recourse for challenging the arbitral award. Whereas Section 48 of the Act, 1996 is a comprehensive provision, dealing with a foreign award, like the present one, which can be invoked for enforcement of the arbitral award or be subjected to challenge b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter I (Section 44 to 52) of Part II deals with "New York Convention awards‟. Section 44 defines "foreign award‟, under Chapter I of Part II of the Act, as an arbitral award made in pursuance of an arbitration agreement as provided for in clause (a) of Section 44, and in such territory as provided for in clause (b) of Section 44. Section 45 provides for the "Power of judicial authority to refer parties to arbitration‟ in respect of an arbitration agreement referred to in Section 44. Section 46 to Section 49 deal with Enforcement of the foreign awards under Chapter I of Part II of the Act. 43. The first part of Section 46 provides for the effect of a foreign award which would be enforceable under chapter I- by stating that the same shall be binding for all purposes on the persons as between whom it was made. The Second part of Section 46 provides for the manner in which such a foreign award may be relied upon. It states that the same may be relied upon by persons by way of defence, set off or otherwise in any legal proceedings. The later part of Section 46 provides for the manner in which, references to enforcing an award under Chapter I, are to be construed or, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, by relying upon the same by way of a defence, set off or otherwise, by following the procedure prescribed under Section 47 of the Act. Such enforcement may then be opposed by the plaintiff/award debtor by producing evidence under Section 48 of the Act. 45. Chapter I of Part II the Act deals, firstly, with the definition of "foreign awards‟; secondly, with the power of the judicial authority to refer the parties to arbitration, and; thirdly, with the enforcement of foreign awards. 46. A comparative analysis of the provisions of Part I and Part II of the Act reveals that request for refusal of enforcement of an award as provided for in Section 48, cannot be equated to, and is different from, an independent remedy for seeking recourse against an award (as provided for in Section 34). Firstly, Chapter VII of Part I of the Act (wherein Section 34 falls), bears the heading "Recourse against Arbitral Award‟. There is no corresponding Chapter provided for in Part II of the Act. There is no recourse against a foreign award in an Indian Court under Part II of the Act. Secondly, Chapter VIII of Part I of the Act relates to "Finality and Enforcement of Arbitral Awards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty furnishes proof that - "the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or the under the law of which, that award was made". Further, Section 48(3) states that 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. Therefore, Section 48 in itself contemplates the initiation of independent proceedings for assailing the foreign award before the competent Court/authority of the country where the award was made, or under the law of which, the award was made. A proceeding under Section 48 of the Act cannot be converted into one to assail the foreign award, i.e. to seek the setting aside of the foreign award. 49. The decision of the Supreme Court in Shin-Etsu Chemical Co. Ltd. (Supra), relied upon by the petitioners, dealt with an entirely different issue. The questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . "Enforcement" is of an award. It is not the enforcement of legal rights that was being discussed in Section 7(i) of the Arbitration (Protocol and Convention) Act, 1937. Unless the award comes into being, I fail to understand where is the question of its enforcement. The said decision of the Calcutta High Court, therefore, is of no avail to the petitioner. 52. The decision in Centrotrade Minerals and Metals (supra) of the Calcutta High Court, with respect, does not lay down the correct legal proposition in my view in so far as it holds "at the same time the person against whom the foreign award has gone could approach the Court for setting aside such an award". I see no reason to disagree with the view taken by a co-ordinate Bench of this Court in Bulk Trading SA (supra), the Bombay High Court in Jindal Drugs Ltd.(supra), and by the Karnataka High Court in Vikrant Tyres Ltd. (supra) in so far as they holds that an independent proceeding underSection 48 of the Act cannot be maintained, unless the foreign award is sought to be enforced in legal proceedings. 53. The submission based on a distinction sought to be drawn between the expressions "enforced" ..... X X X X Extracts X X X X X X X X Extracts X X X X
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