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TMI Blog2020 (4) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... ve violated the Export Control Order, and it was not permissible to carry forward the quantity of the previous year to the next year because of the Export Control Order without permission of the Government. In the present case, because of the clear stipulation in Clause 14 of the Agreement, it is apparent that the parties have agreed for a contingent contract. They knew very well that the Government's executive, or legislative actions might come in the way as provided in Clause 14 of the Agreement. Thus, in this case, Section 32 of the Contract Act is attracted and not the provisions of Section 56. It was an agreement to do an act impossible in itself without permission, and that is declared to be void by Section 32. The contract was capable of being performed in case the Government gave the requisite authorization - Section 56 is not attracted as the promisor and promisee both knew the reason in advance as in agreement such a contingency was provided itself in case of Government's executive order comes in the way, for cancellation of the contract. Thus, the contract became void on the happening of the contingency, as provided in Section 32 of the Contract Act. This Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7(1) (b)(ii) that if the court dealing with the case is satisfied that the enforcement of the award will be contrary to public policy, the foreign award may not be enforced. The foreign award may also not be executed in the case as per Section 7(1)(a)(i) if the parties to the agreement under the law applicable are under some incapacity or agreement is not valid under the law. Similar exigency is provided in Section 7(1)(a)(ii) if proper notice of appointment of Arbitrator is not given or the party was unable to present its case. Section 7(1)(a)(iii) provides that if the award deals with the questions not referred or contains decisions on matters beyond the scope of the agreement renders award unenforceable. Section 7(1)(a)(iv) makes an award not capable of enforcement in case the composition of the Arbitration Tribunal or procedure is not in accordance with the agreement of the parties. When the award can be said to be contrary to public policy? - HELD THAT:- This Court considered the issue in several decisions. The expression public policy concerning the agreement relates to the public policy of the country where award is being enforced. Section 23 of the Contract Act, 1872 deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be unenforceable. - Arun Mishra, M.R. Shah And B.R. Gavai, JJ. JUDGMENT Arun Mishra, J. 1. The question involved in the present appeal is the enforceability of the foreign award. The main objections for its enforceability are (i) whether NAFED was unable to comply with the contractual obligation to export groundnut due to the Government's refusal?; (ii) whether NAFED could have been held liable in breach of contract to pay damages particularly in view of Clause 14 of the Agreement?; and (iii) whether enforcement of the award is against the public policy of India? 2. The NAFED and the Alimenta S.A. entered into a contract for the supply of 5,000 metric tonnes of Indian HPS groundnut (for short, commodity ). Clause 11 of the contract provided that terms and conditions would be as per FOSFA, 20 Contract, a standard form of contract which pertains to the CIF contract. The contract entered into was not a Free on Board (FOB) contract. 3. NAFED was a canalizing agency for the Government of India for the exports of the commodity. For any export, which is to be carried forward to next year from the previous year, NAFED required the express permission and consent of the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to perform the first Addendum in the oblivion of the fact that it had no permission under the Export Control Order to carry forward the export for the season 1979-80 to the next year 1980-81. Being a Canalizing agency for the Government of India, NAFED couldn't carry forward the supply for the subsequent year. NAFED approached the Government of India to grant permission. 10. The Ministry of Agriculture, Government of India, vide letter dated 1.12.1980 directed NAFED not to ship any leftover quantities from previous years. It was made clear that the export of commodities was restricted under a quota system and that NAFED could not carry forward the previous years' commitment to the subsequent year. The commitment entered into by NAFED was objected to. Apart from that, the price of the commodity had escalated thrice than the prevailing price within one year. Inter alia, for the aforesaid reasons, the Government of India asked NAFED not to implement the previous year contract. It was for a particular season. 11. On 6.12.1980 and 9.12.1980, NAFED again requested the Government of India to allow the release of quota in the current season to fulfil its commitments under the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half by 20.4.1981, failing which FOSFA would appoint an arbitrator on behalf for NAFED. 17. On 9.4.1981, NAFED by telex message through their counsel informed FOSFA that it had no jurisdiction to proceed with the arbitration in view of the order of stay by the High Court and any action taken by Alimenta S.A. or by Mr. Scott of FOSFA would be illegal and void. On 22.4.1981, the matter came up before the High Court of Delhi. The counsel on behalf of the Alimenta S.A. was granted four weeks to file a reply; the case was adjourned to 27.7.1981. The interim order of stay was accordingly extended till 21.7.1981. 18. However, in disregard of the order passed by the High Court, FOSFA appointed Mr. F.A.D. Ralfe as an Arbitrator on behalf of the NAFED on 23.4.1981. Thus, the NAFED urged that it was deprived of the right to appoint its nominee Arbitrator. The NAFED vide its letter dated 1.5.1981 informed FOSFA that despite the order of stay by the High Court, contumacious steps were taken to appoint the Arbitrator on its behalf and it was further stated that the counsel appearing for Alimenta S.A., stated in the Court that Alimenta S.A. would not proceed further in the arbitration. Ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttlement price of USD 2275 per metric tonnes plus USD 15 per metric tonnes for double bags as damages. The amount was ordered to be paid with interest at the rate of 10.5% per annum from 13.2.1981 till the date of the award. 23. Being aggrieved by the award, NAFED filed an appeal before the Board of Appeal on 16.1.1990, however, on 13.5.1990 and 30.5.1990 multiple requests were made by M/s. Clyde and Co. (solicitor firm) to represent NAFED before the Board of Appeal, considering there were special circumstances and Indian law was required to be explained. The Board of Appeals rejected the request by NAFED to be represented through its Solicitors on 14.5.1990. 24. Ultimately, the Board of Appeal on 14.9.1990 while deciding the appeal compounded NAFED's issues by enhancing the award, whereas Alimenta S.A. filed no appeal. NAFED was directed to pay interest components at the rate of 11.25% instead of 10.5% p.a. The interest was enhanced in the absence of an appeal by Alimenta S.A. The Arbitrator nominee of Alimenta S.A., who passed the award, represented the case on behalf of the Alimenta S.A. before the Board of Appeal. 25. The Alimenta S.A. filed a petition as Suit No. 1885 of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restriction imposed by the Government of India as to the export of the commodity. Award flouts the basic norms of justice. The enforcement of such an award would result in the unjust enrichment of Alimenta S.A. at the cost of the very survival of the Appellant organisation. The enforcement procedure is barred by limitation. The same was not brought within 30 days in terms of Article 119, Schedule I of the Limitation Act, 1963. The learned Single Judge could not have converted the award into a decree. The learned Single Judge awarded interest at the rate of 18 percent per annum; besides, in case there is exchange deviation by way of loss, NAFED would be required to make good such loss. NAFED was not given due opportunity to present its case by the Arbitral Tribunal. Arbitrator-nominee of Alimenta S.A. represented case on behalf of Alimenta S.A. before the Board of Appeal, award was unfair, and enhancement of interest in the absence of appeal was also illegal. The decision is contrary to the public policy of India as laid down in various decisions. 29. Per contra, Mr. C.A. Sundaram, learned senior Counsel appearing on behalf of the Respondent argued the scope of interference in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the export for the season 1979-80 to the year 1980-81 under the Export Control Order, which was not given. When it was again sought for, it was specifically refused by the Government of India on various grounds. 32. Clause 14 of the FOSFA, 20 Contract dated 12.1.1980, entered between the parties is significant in this regard. The relevant Clauses 14, 18, and 20 are extracted hereunder: EXTRACTS OF RELEVANT CLAUSES OF FOSFA 20 CONTRACT DATED 12-01-1980 BETWEEN PETITIONER AND RESPONDENT 14. PROHIBITION: In the event, during the shipment period of prohibition of export of any other executive or legislative act by or on behalf of the Government of the country of origin or of the territory where the port/s or shipment named herein is/are situate, or of blockade or hostilities, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract of any unfulfilled portion thereof shall be extended by 30 days. In the event of shipment during the extended period st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the clause, the agreement shall be cancelled. 33. The Government of India, Ministry of Agriculture and Irrigation wrote a letter on December 1, 1980, to the Managing Director of the NAFED in which it pointed out that it was undesirable to make the supply in the current season at the rate of previous years contract and apart from that no exporter could undertake to export any commodity with such a wide variation in prices. It was also pointed out that the export contract of last year is not supposed to be carried forward automatically to next year. The export of the commodity was restricted under a quota system. NAFED could not agree on its own to move forward last year's commitment to the current year without prior approval of the Government. Therefore, NAFED was asked not to consider taking up the previous year's contract for implementation in the current crop season and inform it to the Government. Para 2 of the letter is extracted hereunder: 2. I am told that NAFED could not fulfil some of the contracts for exports last year due to drought in the country. It has been further reported to me that some move is being made to export HPS groundnuts during the current seaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is apparent from the provisions of the contract dated 12.1.1980 that the quantity of 5,000 metric tonnes, to be increased up to 8,000 metric tonnes, depending upon the availability of stocks. Clause 8 of the Agreement dated 12.1.1980 provided that shipment was to be from Saurashtra port at the buyer's option during February/March/April 1980. The other terms and conditions were as per FOSFA, 20 contract terms. Addenda dated 18.8.1980 and 6.10.1980 were executed to the agreement/contract dated 12.1.1980. The NAFED had no authority to enter into export for the previous years without prior permission of the Government of India, and it executed both the addenda without such permission. 37. The Minutes of Meeting of Business Committee of NAFED, dated 21.11.1980 at Agenda Item No. 4, notes that there were unseasonable rains in the Saurashtra region and due to cyclone, etc. the groundnut crop was severely damaged, and there was less production. There was less than 50% recovery. There was an escalation of prices as compared to 1978-79 in 1979-80. It appears that NAFED intended to perform the contract in the oblivion of the fact that being a canalizing agent, it could not have carried ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the previous year to fulfil old contracts. 3. Ministry of Agriculture notified you that permission for you to fulfil the previous year's contracts was refused. This was a lawful directions which you were bound to obey. However, even without this express direction you could not have fulfilled these contracts. You would have needed from Ministry of Commerce an additional export quota covering the quantities required. You applied for additional quota generally and this application was refused in view of the prevailing market conditions both internally and externally. Most certainly no additional quota would have been granted to enable you to fulfil old contracts at the previous season's prices. Yours faithfully (VINOD RAI) Deputy Secretary to the Government of India It is apparent that the Government of India issued a direction that was binding upon the NAFED. Without permission, it was not possible for the NAFED to carry out its obligation under the Contract and Addenda. 39. It was argued that in common law, frustration does not rescind the contract ab initio, it brings the contract to an end forthwith, without more and automatically, in the sense that it releases both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally; it could not be continued by affirmation. The Appellant has also placed reliance on the decision in Delhi Development Authority v. Kenneth Builders Developers Private Limited and Ors., (2016) 13 SCC 561 wherein the court held that the contract of Kenneth Builders with the DDA stood frustrated and made impractical to perform because of the prohibition imposed on any construction activity being undertaken on the project land. The Court observed: 30. The interpretation of Section 56 of the Contract Act came up for consideration in Satyabrata Ghose v. Mugneeram Bangur Co. AIR 1954 SC 44. It was held by this Court that the word impossible used in Section 56 of the Contract Act has not been used in the sense of physical or literal impossibility. It ought to be interpreted as impracticable and useless from the point of view of the object and purpose that the parties had in view when they entered into the contract. This impracticability or uselessness could arise due to some intervening or supervening circumstance which the parties had not contemplated. However, if the intervening circumstance was contemplated by the parties, then the contract would stand despite the occurrence of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formance of the contract, but expressly stipulate that the contract would stand despite such circumstance, there can be no case of frustration because the basis of the contract being to demand performance despite the happening of a particular event, it cannot disappear when that event happens. As Lord Atkinson said in Matthey v. Curling, (1922) 2 AC 180 (HL): (AC p. 234) ... a person who expressly contracts absolutely to do a thing not naturally impossible is not excused for non-performance because of being prevented by the act of God or the King's enemies ... or vis major. This being the legal position, a contention in the extreme form that the doctrine of frustration as recognised in English law does not come at all within the purview of Section 56 of the Contract Act cannot be accepted. 36. On a conspectus of the facts and the law placed before us, we are satisfied that certain circumstances had intervened, making it impracticable for Kenneth Builders to commence the construction activity on the project land. Since arriving at some clarity on the issue had taken a couple of years and that clarity was eventually and unambiguously provided by the report of CEC, it could certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd become impossible or unlawful. It also provides for liability of the promisor to do something which he knew or might have known with reasonable diligence an act which is impossible or unlawful; as such, the promisor must make compensation for the non-performance of the promise. 47. Section 32 of the Contract Act applies in case the agreement itself provides for contingencies upon happening of which contract cannot be carried out and provide the consequences. To this case, provisions of Section 32 of the Contract Act is attracted and not Section 56. In case an act becomes impossible at a future date, and that exigency is not provided in the agreement on the happening of which exigency, impossible or unlawful, the promisor had no control which he could not have prevented, the contract becomes void as provided in Section 56. However, Section 56 also provides liability for a cause where the promisor has agreed to do something which he knew or with reasonable diligence might have known and which the promisee did not know to be impossible or unlawful. Such a promisor must make compensation to such promise and is liable to pay damages. The latter part of Section 56 is applicable when p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates the law relating to the discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy, they cannot derogate from the general words used in the enactment. This much is clear that the word impossible has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible, but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do. 10. Although various theories have been propounded by the Judges and jurists in England regarding the juridical basis of the doctrine of frustration, yet the essential idea upon w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, recourse can be had to the principles of English law on the subject of frustration. It must be held also, that to the extent that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions. The decisions of the English Courts possess only a persuasive value and may be helpful in showing how the Courts in England have decided cases under circumstances similar to those which have come before our courts. 15. These differences in the way of formulating legal theories really do not concern us so long as we have a statutory provision in the Indian Contract Act. In deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in Section 56 of the Contract Act, taking the word impossible in its practical and not literal sense. It must be borne in mind, however, that Section 56 lays down a Rule of positive law and does not leave the matter to be determined according to the intention of the parties. 16. In the latest decision of the House of Lords referred to above, the Lord Chancellor puts the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object-Vide Morgan v. Manser, 1947-2 All ER 666 (L). This may be called a Rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all Rules of construction. This is really a Rule of positive law and as such comes within the purview of Section 56 of the Indian Contract Act. 50. The Court followed the decision in Satyabrata Ghose (supra) in Naihati Jute Mills Ltd. v. Khyaliram Jagannath AIR 1968 SC 522, it held that if the contract contains implied or expressly a term according to which it would stand discharged on the happening of certain contingencies, dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of Section 56 of the Contract Act. Such cases have to be dealt with Under Section 32 of the Contract Act. The Court opined: 7. Such a difficulty has, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frustration. The relevant portion is extracted hereunder: 10. The doctrine of frustration of contract is really an aspect, or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a Rule of positive law and does not leave the matter to be determined according to the intention of the parties. 13. In English law, therefore, the question of frustration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in Section 56 of the Indian Contract Act lay down a positive Rule of law and English authorities cannot therefore be of direct assistance, though they have persuasive value in showing how English courts have approached and decided cases under similar circumstances. 14. Counsel on behalf of the Respondent, however, contended that the contract was not impossible of performance, and the Appellant cannot take recourse to the provisions of Section 56 of the Indian Contract Act. It was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which of the three trawlers they desired to have licences. They named three trawlers other than the Respondents', and then claimed that they were no longer bound by the charter-party as its object had been frustrated. It was held by the Judicial Committee that the failure of the contract was the result of the Appellants' own election, and that there was therefore no frustration of the contract. We think the principle of this case applies to the Indian law and the provisions of Section 56 of the Indian Contract Act cannot apply to a case of self-induced frustration . In other words, the doctrine of frustration of contract cannot apply where the event which is alleged to have frustrated the contract arises from the act or election of a party. But for the reasons already given, we hold that this principle cannot be applied to the present case for there was no choice or election left to the Appellant to supply chicory other than under the terms of the contract. On the other hand, there was a positive prohibition imposed by the licence upon the Appellant not to sell the imported chicory to any other party but he was permitted to utilise it only for consumption as raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide what is the true position between the parties. Denny Mott's' case, 1944 A.C. 265. Lord Sumner observed in the 'Hirji Mulji' case (1926) A.C. 497 that the legal effect of the frustration of the contract does not depend on the intention of the parties or their opinions or even knowledge as to the events which brought about the frustration but upon its occurrence in such circumstances as to show it to be inconsistent with the further prosecution of the adventure. In my view, this principle is applicable in this case. 23. The main object of the contract was the transhipment of the goods from Bihar to Bengal by Railway in my opinion, having regard to the events that have happened the basis of the contract has been overthrown. In the absence of express intention of the parties, I have to determine what is just reasonable in view of the non-availability of wagons for transport the difficulties created by the restrictions or emergency orders. It may be now accepted as settled law that when people enter into a contract which is dependant for its performance on the continued availability of a specific thing that availability comes to an end by reason of circumstances bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this chance of the control of Government going on. For these reasons, I answer the questions which have been put to me in this way: Firstly: Did, in the circumstances hereinbefore mentioned, such a contract become void and were the sellers excused from the performance thereof? My answer is, yes, the contract became void before breach. Secondly: Are the buyers entitled to recover any compensation from the sellers? I answer that no, either in respect of goods which were lying ready at the up-country station which the railway company refused to accept for despatch or in respect of goods which were not so delivered. I answer no to both parts of the second question because the performance having become impossible, no tender could have had any effect upon the railway company. It is important in this case to add that this decision proceeds entirely upon the facts as given to me by agreement, not only the facts as regards the contract and the position of railway traffic but also the facts stated as regards the assumptions and intentions of the parties. When the latter class of facts is not the same, it is very probable that different considerations altogether will prevail. 55. In Smt. Sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, we are of the opinion that the contract was rendered void in terms of Section 32 of the Contract Act. 56. In Narayana Chandrasekhara Shenoy and Bros. by sole Proprietor Narayana Shanbog v. R. Palaniappa Mudaliar AIR 1952 Mad. 670, a question arose whether the Defendant was required to supply jaggery by rail, which became impossible by the issuance of a Government notification controlling the movement of jaggery by rail. The Plaintiff refused to bear the additional expenditure entailed by the change in the mode of transport. The Court held that even assuming that the contract had not become impossible of performance, the Defendant did not commit a breach of the contract. In the instant case, export became impossible due to Government's refusal. 57. It would have been unlawful for NAFED to affect the supply in view of the Government's refusal to accord the permission, and both the parties knew it very well and agreed that the contract would be cancelled in such an exigency for non-supply in quantity. Thus, they were bound by the agreement. The award pre-supposes supply could have been made after the Government's refusal. If supply had been made, it would have been unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; or (b) if the court dealing with the case is satisfied that---- (i) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (ii) the enforcement of the award will be contrary to public policy. (2) If the court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred to in Sub-clause (v) of Clause (a) of Sub-section (1), the court may, if it deems 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 furnish suitable security. (emphasis supplied) 60. It is provided in Section 7(1) (b)(ii) that if the court dealing with the case is satisfied that the enforcement of the award will be contrary to public policy, the foreign award may not be enforced. The foreign award may also not be executed in the case as per Section 7(1)(a)(i) if the parties to the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal policy of Indian Law, (2) the interest of India, and (3) justice or morality. The relevant portion is extracted hereunder: 63. In view of the absence of a workable definition of international public policy, we find it difficult to construe the expression public policy in Article V(2)(b) of the New York Convention to mean international public policy. In our opinion, the said expression must be construed to mean the doctrine of public policy as applied by the courts in which the foreign award is sought to be enforced. Consequently, the expression 'public policy' in Section 7(1)(b)(ii) of the Foreign Awards Act means the doctrine of public policy as applied by the courts in India. This raises the question whether the narrower concept of public policy as applicable in the field of public international law should be applied or the wider concept of public policy as applicable in the field of municipal law. 65. This would imply that the defence of public policy which is permissible Under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that Under Article I(e) of the Geneva Convention Act of 1927, it is permissible to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy Under Section 7(1)(b) (ii) of the Foreign Awards Act, we will now proceed to consider the various grounds on the basis of which the said provision is invoked by Renusagar to bar the enforcement for the award of the Arbitral Tribunal. As indicated earlier, Renusagar has invoked the said provision on the ground that enforcement of the award would be contrary to the public policy for the reason that such enforcement-- (a) would involve contravention of the provisions of FERA; (b) would amount to penalising Renusagar for not disregarding the interim orders passed by the Delhi High Court in the writ petition filed by Renusagar; (c) would enable recovery of compound interest on interest; (d) would result in payment of damages on damages; (e) would result in unjust enrichment by General Electric; We will examine the submissions of learned Counsel under each head separately. 64. In Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, this Court opined that the phrase Public Policy of India in the Arbitration and Conciliation Act, 1996 Under Section 34(2) (b) (ii), with respect to domestic awards, should be given a wider meaning. The court observed: 15. The result is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated by permitting patently illegal award to operate. Patently illegal award is required to be set at naught, otherwise it would promote injustice. 31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case, 1994 Supp (1) SCC 644, 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 interest of India; or (c) justice or morality, or (d) in addition, if it is patently i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion public policy in Section 7(1)(b)(ii) of the Foreign Awards Act refers to the public policy of India. The expression public policy used in Section 7(1)(b)(ii) was held to mean public policy of India. A distinction in the Rule of public policy between a matter governed by the domestic law and a case involving conflict of laws has been noticed in Renusagar. For all this, there is no reason why Renusagar should not apply as regards the scope of inquiry Under Section 48(2)(b). Following Renusagar, we think that for the purposes of Section 48(2)(b), the expression public policy of India must be given a narrow meaning and the enforcement of foreign award would be refused on the ground that it is contrary to the public policy of India if it is covered by one of the three categories enumerated in Renusagar. Although the same expression public policy of India is used both in Section 34(2)(b)(ii) and Section 48(2) (b) and the concept of public policy in India is same in nature in both the Sections but, in our view, its application differs in degree insofar as these two Sections are concerned. The application of the public policy of India doctrine for the purposes of Section 48(2)(b) is mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Justice or morality, would be set aside on the ground that it would be contrary to the public policy of India. It went on further to hold that a contravention of the provisions of the Foreign Exchange Regulation Act would be contrary to the public policy of India in that the statute is enacted for the national economic interest to ensure that the nation does not lose foreign exchange which is essential for the economic survival of the nation (see SCC p. 685, para 75). Equally, disregarding orders passed by the superior courts in India could also be a contravention of the fundamental policy of Indian law, but the recovery of compound interest on interest, being contrary to statute only, would not contravene any fundamental policy of Indian law (see SCC pp. 689 693, paras 85 95). 27. Coming to each of the heads contained in Saw Pipes [(2003) 5 SCC 705] judgment, we will first deal with the head fundamental policy of Indian law. It has already been seen from Renusagar [1994 Supp (1) SCC 644] judgment that violation of the Foreign Exchange Act and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law. To this, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be set aside for error of law on the face of it. This was regretted by Williams, J., in Hodgkinson v. Fernie, (1857) 3 CB (NS) 189, but is now well established. 67. In Ssanyong Engineering Construction Co. Ltd. v. National Highways Authority of India (NHAI), (2019) 8 SCALE 41, the Court concerning the public policy held: 23. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the Renusagar understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is almost in the same terms as Sections 34 and 48 of the 1996 Act, the said judgment is of great importance in understanding the parameters of judicial review when it comes to either foreign awards or international commercial arbitrations being held in India, the grounds for challenge/refusal of enforcement Under Sections 34 and 48, respectively, being the same. After referring to the New York Convention, this Court delineated the scope of enquiry of grounds Under Sections 34/48 (equivalent to the grounds Under Section 7 of the Foreign Awards Act, which was considered by the Court), and held: 34. Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of Clauses (a) to (e) of Article I had to be fulfilled and in Article II, it was prescribed that even if the conditions laid down in Article I were fulfilled recognition, and enforcement of the award would be refused if the Court was satisfied in respect of matters mentioned in Clauses (a), (b) and (c). The principles which apply to recognition and enforcement of foreign awards are in substance, similar to those adopted by the English courts at common law. (Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational Commercial Arbitration, 2nd Edn., p. 461.) 37. In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961 , the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. xxx xxx xxx 65. This would imply that the defence of public policy which is permissible Under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that Under Article I(e) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol Convention Act of 1837(sic 1937) which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression public policy covers the field not covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its opinion 'the scope of enquiry before the court in which the award is sought to be enforced is limited [to the grounds mentioned in the Act] and does not enable a party to the said proceedings to impeach the Award on merits']. Nor does the Model Law. The same theme is echoed in standard textbooks on international arbitration. Thus, in International Commercial Arbitration by Gary B. Born (Wolters Kluwer, Second Ed., 2014) [ Gary Born ], the learned author deals with this aspect of the matter as follows: [12] No Judicial Review of Merits of Foreign or Non-Domestic Awards in Recognition Actions It is an almost sacrosanct principle of international arbitration that courts will not review the substance of arbitrators' decisions contained in foreign or non-domestic arbitral awards in recognition proceedings. Virtually every authority acknowledges this Rule and virtually nobody suggests that this principle should be abandoned. When national courts do review the merits of awards, they labour to categorize their action as an application of public policy, excess of authority, or some other Article V exception, rather than purporting to justify a review of the merits. [a] N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have uniformly adopted the same view of the Convention [See, for e.g., K.-H. Bockstiegel, S. Kroll P. Nacimiento, Arbitration in Germany 452 (2007)]. (at pp. 3707-3710) Likewise, the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (2016 Ed.) [ UNCITRAL Guide on the New York Convention ] also states: 9. The grounds for refusal Under Article V do not include an erroneous decision in law or in fact by the arbitral tribunal. A court seized with an application for recognition and enforcement under the Convention may not review the merits of the arbitral tribunal's decision. This principle is unanimously confirmed in the case law and commentary on the New York Convention. (emphasis supplied) 68. It is apparent from above-mentioned decisions as to enforceability of foreign awards, Clause 14 of FOSFA Agreement and as per the law applicable in India, no export could have taken place without the permission of the Government, and the NAFED was unable to supply, as it did not have any permission in the season 1980-81 to effect the supply, it required the permission of the Government. The matter is such which pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30.10.1981, NAFED filed a writ petition against the Alimenta S.A. and Arbitrator to prevent the arbitration proceedings. It was further argued that the Appellant was deprived of appointing arbitrators; the same was against the public policy. As per Rule 1(a) of FOSFA Rules, each party had the right to nominate its Arbitrators. As per Rule 1(d), the party claiming arbitration can only apply to FOSFA for the appointment of an arbitrator on behalf of the other party. As there was restraint order, the appointment of Arbitrator by FOSFA Under Rule 1(d) of the Rules was illegal. A party claiming arbitration could only apply for the appointment of Arbitrator on behalf of another party. Learned senior Counsel further urged that the action taken was in contravention of natural justice and is a nullity violating the interim order of the court as opined in Manohar Lal (Dead) by Lrs. v. Ugrasen (Dead) by Lrs. and Ors., (2010) 11 SCC 557. In Manohar Lal (supra), the court held thus: 24. In Mulraj v. Murti Raghunathji Maharaj AIR 1967 SC 1386, this Court considered the effect of action taken subsequent to passing of an interim order in its disobedience and held that any action taken in disobed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent, Alimenta S.A., could not approach the Indian Court to enforce such an award passed by the Arbitral Tribunal. 72. Though this Court passed an interim order, ultimately, it dismissed the petition filed on behalf of the NAFED, and it was open to the Appellant to raise the question at the relevant time when this Court decided the matter in the year 1987. This Court permitted the arbitration proceedings to continue. As such, we are of the opinion that though it would have been proper for the FOSFA to comply with the interim orders passed by this Court, the proceedings in which the temporary orders were given were dismissed way back in the year 1987. At that time, the question was required to be agitated. This Court permitted to continue proceedings in 1987. The said questions ought to have been raised at that stage; we cannot permit the Appellant to raise them now. Hence, at this stage, we are not inclined to entertain and examine merits of the argument mentioned above. 73. Learned senior Counsel appearing on behalf of the Appellant also argued that NAFED was not allowed to have any legal representation before the arbitral tribunal or in the Board of Appeal. Rule 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. For the reasons mentioned above, we think that there had been a contravention of Rule 15(5). We are also of the opinion that the Appellant had not been afforded a reasonable opportunity to defend himself. Hence the impugned order is liable to be struck down, and it is hereby struck down. The facts of this case are not such as to justify any fresh enquiry against the Appellant. Hence we direct that no fresh enquiry shall be held against the Appellant, and he be restored to the position to which he would have been entitled to but for the impugned order. The appeal is accordingly allowed. The Appellant is entitled to his costs from the Respondents both in this Court as well as in the High Court. The decision of Board of Trustees of the Port of Bombay v. Dilipkumar Raghavendranath Nadkarni and Ors. (1983) 1 SCC 124 has been relied on, wherein it was held: 9. We concern ourselves in this case with a narrow question whether where in such a disciplinary enquiry by a domestic tribunal, the employer appoints Presenting-cum-Prosecuting Officer to represent the employer by persons who are legally trained, the delinquent employee, if he seeks permission to appear and defend himself by a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y condonation on application by the party fulfilling the condition within a time allowed by the court. We must always remember that processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. It has been wisely observed that procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. Where the non-compliance, tho' procedural, will thwart fair hearing or prejudice doing of justice to parties, the Rule is mandatory. But, grammar apart, if the breach can be corrected without injury to a just disposal of the case, we should not enthrone a regulatory requirement into a dominant desideratum. After all, courts are to do justice, not to wreck this end product on technicalities. Viewed in this perspective, even what is regarded as mandatory traditionally may, perhaps, have to be moderated into wholesome directions to be complied with in time or in extended time. Be that as it may, and ignoring for a moment the exploration of the true office of procedural conditions, we have no doubt that what is of the essence of Rule 3 is not that three copies should be furnished, but that copies of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreting a part of the adjective law dealing with procedure alone in such a manner as to subserve and advance the cause of justice rather than to defeat it as all the laws of procedure are based on this principle. 77. On behalf of the Respondent, letter dated 17.11.2011 issued by FOSFA was relied on stating that even though the FOSFA Rules are silent on the issue of the first tier Arbitrator acting as a representative of the party in the second tier, i.e., at the appellate stage, the practice prevalent at the relevant time in the UK allowed the same. The FOSFA mentioned in the letter that many parties in cases before FOSFA elected to make such an appointment with the agreement of the individual arbitrator concerned, and this practice was prevalent. 78. The Arbitrator appeared at the appellate stage, though, as per the Indian Law and the ethical standards, the Arbitrator could not have appeared at the second stage to defend arbitration award passed by him, and should have kept aloof. However, no concrete material has been placed on record to substantiate the objection as to prevailing practice and law in U.K. at the relevant time. Hence, we are not inclined to decide the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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