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2014 (9) TMI 1276 - HC - Indian LawsSeeking execution of the award against the claimant who is the Award Debtor in the arbitration - Violation of Section 25.1 of the Arbitration Agreement - Violation of Section 8 of the FEMA. Violation of Section 25.1 of the Arbitration Agreement - HELD THAT - The agreement between the parties or the enforcement of such agreement by the arbitral tribunal cannot require either of the parties to do any act prohibited under the law relating to foreign trade controls export controls embargoes or international boycotts. The award which would require any of these would fall foul of the contract between the parties. An award which grants any amount to or against any party under the law and which would have to be paid in foreign exchange by one of the parties would not be included within the mischief of clause 21 of the contract. There is therefore nothing that the learned Arbitral Tribunal has decided against any of the terms of the contract between the parties. Once that aspect has been determined as per the law governing the parties this Court in enforcement of the award which has been passed cannot interfere with it. Violation of Section 8 of the FEMA - HELD THAT - Reliance placed upon the judgment in the case of Director of Enforcement Vs. MCTM Corporation Pvt. Ltd. and Ors. 1996 (1) TMI 351 - SUPREME COURT to show that the same analogy was applied under Section 10 of the FERA 1947 which was analogous to Section 16 of the FERA 1973 so that the person who had the right to receive FE could not refrain from doing or taking any action which would have effect of delaying or ceasing the receipt of such FE. It is held that the default would be complete on the failure to get FE receivable in India repatriated within the reasonable time after the right to receive the same accrues. It is observed that the reasonable time would depend upon the circumstances of each case and cannot depend upon any general formula. It is observed that if the delay in repatriation was not unreasonable there would be no contravention of Section 10(1)(a) of FERA. In this case the delay in receiving the amount due is of 7 weeks with a corresponding consideration of payment of lesser amount if the negotiations fructified and the amended contract or new contract was executed - There would therefore be no contravention of Section 8 of FEMA. The award dated 17th January 2011 is seen to be enforceable and must be enforced by the Court.
Issues Involved:
1. Execution of a foreign arbitral award. 2. Compliance with Section 47(1)(b) of the Arbitration and Conciliation Act, 1996. 3. Jurisdiction for filing the execution application. 4. Refusal of enforcement under Section 48 of the Arbitration and Conciliation Act, 1996. 5. Violation of Section 25.1 of the Arbitration Agreement. 6. Violation of Section 8 of the Foreign Exchange Management Act, 1999 (FEMA). 7. Public policy considerations under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996. Detailed Analysis: Execution of a Foreign Arbitral Award: The applicant, Vitol, sought to execute an award dated January 17, 2011, as a foreign award under Section 44A of the CPC, since the award was passed by an arbitral tribunal in a reciprocating territory, London, UK. Vitol filed the application for execution within two months of the award date. Compliance with Section 47(1)(b) of the Arbitration and Conciliation Act, 1996: BIL contended that Vitol did not comply with Section 47(1)(b) of the Act because the certified copy of the entire arbitration agreement, including SCoTA, was not annexed to the petition. The court held that the requirement under Section 47(1)(b) was for the convenience of the court to see the foreign award and the agreement under which the reference to the arbitral tribunal was made. Since a certified copy of the award was filed and accepted by both parties, further evidence was not required. Jurisdiction for Filing the Execution Application: BIL argued that the execution application should have been filed in Indore, Madhya Pradesh, where the registered office of the company is situated. The court rejected this contention, stating that the award, like a decree, must be executed in the court within whose jurisdiction the properties sought to be attached and sold in execution are situated. Vitol showed properties within the jurisdiction of the Bombay High Court, and neither party showed any properties in Madhya Pradesh. Refusal of Enforcement under Section 48 of the Arbitration and Conciliation Act, 1996: BIL sought refusal of enforcement on several grounds, including: - Contrary to substantive provisions of law. - Against the terms of the contract. - Against the fundamental policy of Indian Law. - In violation of statutory provisions. - Not in public interest. - Adversely affecting the administration of justice. - Against public policy of India. - Promoting injustice. The court addressed these grounds under Section 48(2)(b) of the Act. Violation of Section 25.1 of the Arbitration Agreement: Clause 25.1 allowed amendments to the agreement by mutual written consent. BIL argued that the arbitral tribunal allowed an oral amendment, which was against the contract terms. The court held that the principle of equitable estoppel applied, meaning BIL was estopped from contending contrary to its request and representation that Vitol may keep the washout amounts as security. The tribunal's decision did not constitute an amendment to the agreement but was based on the parties' actions. Violation of Section 8 of the Foreign Exchange Management Act, 1999 (FEMA): BIL argued that retaining the washout charges violated Section 8 of FEMA, which requires realisation and repatriation of foreign exchange. The court held that Section 8 requires reasonable steps to be taken to realise and repatriate foreign exchange. The temporary retention of the washout charges was part of negotiations and did not constitute a permanent relinquishment of rights. The court found no contravention of Section 8 of FEMA. Public Policy Considerations under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996: BIL argued that enforcing the award would be against public policy, citing the case of Oil and Natural Gas Corporation Vs. Saw Pipes Ltd. The court referred to the case of Renusagar Power Co. Ltd. Vs. General Electric Co., which laid down that enforcement of a foreign award could be refused only if it was contrary to: - Fundamental policy of Indian law. - The interests of India. - Justice or morality. The court held that the narrow meaning of "public policy" as given in Renusagar should apply to the enforcement of foreign awards, and the wider meaning in Saw Pipes applied only to domestic awards. Therefore, the award was not against public policy. Conclusion: The award dated January 17, 2011, is enforceable. The notice taken out under Order 21 Rule 22 is made absolute, and the execution application shall proceed. The notice and execution application are disposed of accordingly.
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