TMI Blog2001 (8) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or hindrance to the execution of the contract time wise; that though time had been considered to be of the essence condition, the inclusion of the force majeure clause which provided no time limit to the suspension of the contract caused by conditions envisaged herein though unusual it was accepted that the earlier contracts would be negotiated and executed successfully by the parties to the dispute. - CIVIL APPEAL NO. 12930 OF 1996 - - - Dated:- 31-8-2001 - S. RAJENDRA BABU AND S.N. PHUKAN, JJ K.K. Venugopal, G.K. Banerjee, R.N. Karanjawala, Nandini Gore Julie Buragohain and Manik Karanjawala for the Appellant. Dr. A.M. Singhvi, K.G. Singhania, Mahesh Agarwal, Rishi Agrawala, Mohit Lahoty, Saif Mahmood, P.C. Sen and E.C. Agrawala for the Respondent. JUDGMENT Rajendra Babu, J. A contract [bearing No. S-142] for supply of aluminum rods of 2400 metric tonnes @ 200 MT per shipment every month from January to December 1991 was proposed by the respondent to the appellant on 31-8-1990 containing an arbitration clause. In the letter accompanying the contract, it was stated to sign and return copy for sake of good order. The appellant did not sign nor retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement that the appellant would participate in the arbitration proceedings under protest. The appeal filed against it stood dismissed by an order on 18-12-1991. In the meanwhile, suit was treated as a petition under section 33 of the Arbitration Act, 1940 which stood dismissed on the ground that the arbitration clause bound the parties. The arbitrators published an award on 29-7-1992 awarding damages amounting to US$ 676,000 including pre-award interest but did not award post-award interest. The appellant filed an appeal to the Appeal Board of the London Metal Exchange seeking to set aside the award as also dispensation of deposit. Since the London Metal Exchange rejected the request for waiver of deposit, the appeal could not be pursued. Thereafter, a petition was filed in the Bombay High Court by the respondent under the Foreign Awards (Recognition Enforcement) Act, 1961 ( the Act ) for enforcement of the award. The High Court allowed the petition and granted the certificate under article 134-A of the Constitution. The High Court, while disposing the petition, awarded interest @ 15 per cent for the post-award period until payment. This order is in challenge before us. 3. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcement can, therefore, be granted under the New York Convention. In a case decided by the United States District Court between Sen Mar, Inc.[US] v. Tiger Petroleum Corpn. N.V. [Yearbook Commercial Arbitration, Vol. XVIII, 1993, p. 493] in which the respondent had contended that the purported arbitration clause does not satisfy the Convention s writing requirement, which defines in article II(2), a writing as an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letter . It was held that the respondent s responsive telexes are not only devoid of arbitration language they also disavow the entire contents of the petitioner s 17 July telexes. Shri Venugopal next referred to the decision of the Italian Court of appeal in Finagrain Compagnie Commerciale Agricole et Financiere S.A. v. Patano Snc. (Italy) [Yearbook Commercial Arbitration, Vol. XXI, 1996, p. 571]. In that case, the three contracts were concluded for sale of colzaseed oil. One of the contracts was concluded in writing, was signed by the parties and contained a specific reference to FOSFA Contract No. 54 and the arbitration clause therein contained. The ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, held that the arbitration clause to be without effect. Shri Venugopal next referred to the decision of Corte Di Cassazione in Societa Atlas General Timbers v. Agenizia Concordia Line, [Yearbook Commercial Arbitration, Vol. III, 1978, 267]. It was held therein that the validity of the arbitral clause in question had to be judged under the New York Convention. According to article II, para 2 of the Convention, the arbitration clause in writing means an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams . This provision, therefore, requires clearly the signature as a minimum element for the effectiveness of the contract containing the arbitral clause. The court concluded that not the arbitration clause itself, but the contract in which it is contained must be signed by both parties under article II, para 2 of the Convention. The Court examined whether the requirement was met in the present case and found that the signature of the agent of the carrier was not sufficient since his power of attorney was not in writing and that the signature of the other party was also lacking and his endorsement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertain to this aspect of the matter and they read as under: "Article II 1. Each contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of defined legal relationship, whether contractual or not, concerning a subject-matter capable of settlement by arbitration. 2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams." 6. What needs to be understood in this context is that the agreement to submit to arbitration must be in writing. What is an agreement in writing is explained by para 2 of article II. If we break down para 2 into elementary parts, it consists of four aspects. It includes an arbitral clause (1) in a contract containing an arbitration clause signed by the parties, (2) an arbitration agreement signed by the parties, (3) an arbitral clause in a contract contained in exchange of letters or telegrams, and (4) an arbitral agreement contained in exchange of letters or telegrams. If an arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f credit though not addressed to the respondent would indicate that they were not acting in pursuant to the contracts [S-142 and S-336] with the respondent and now it is not possible for the appellant to wriggle out of the same. It cannot be said that what is agreed to by them is only regarding the supply of goods and not in regard to other terms. Therefore, the contention advanced by Shri Venugopal in this connection stands rejected. 8. Dr. Singhvi, however, contended that the scheme of the Act would indicate that the agreement need not be signed by the parties at all nor even para 2 of article II of the Schedule would arise for consideration at all. According to him, under section 2( a ) if there is an award in pursuance of an agreement in writing for arbitration to which the Convention set forth in the Schedule applies, the court has jurisdiction to enforce the same and each contracting State shall recognise an agreement in writing which does not refer to any signature by the parties nor refer to exchange of letters or telegrams and, therefore, submitted that even in the absence of the signatures of the parties or exchange of letters an agreement in writing simplicitor if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on differences between persons not considered as domestic awards and, therefore, an application under section 33 of the Arbitration Act, and consideration of the same will not amount to a decision in the case as to be binding on the parties much less can such a decision be treated as a bar on further proceedings on the principle of res judicata. This Court in Renusagar Power Co. Ltd. s case ( supra ) had occasion to consider the schemes of the provisions of the Act and the Arbitration Act. It was noticed therein that the schemes of the Act and the Arbitration Act, materially differ on several aspects and an examination was made of sections 3, 4 and 7 of the Act in comparison with sections 32, 33 and 34 of the Arbitration Act, to bring out such differences. However, it was noticed that the scheme under sections 3 and 7 contemplates that questions of existence validity or effect of the arbitration agreement differ in cases where such an agreement is wide enough to include within its ambit such questions which could be decided by the arbitrators but their determination is subject to the decision of the court and such decision of the court can be had either before the arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the fact that under Arbitration (Protocol and Convention) Act, 1937 the expression public policy of India had been used, whereas the expression public policy is used in the Act; that after the decision of this Court in V/O Tractoroexport v. Tarapore Co. 1970 (3) SCR 53, section 3 was substituted to bring it in accord with the provisions of the New York Convention on Arbitration of 1958 which seeks to remedy the defects in the Geneva Convention of 1927 that hampered the speedy settlement of disputes through arbitration; that to achieve this objective by dispensing with the requirement of the leave to enforce the award by the courts where the award is made and thereby avoid the problem of double exequatur; that the scope of enquiry is restricted before the court enforcing the award by eliminating the requirement that the award should not be contrary to the principles of the law of the country in which it is sought to be relied upon; that enlarging the field of enquiry to include public policy of the country whose law governs the contract or of the country of place of arbitration would run counter to the expressed intent of the legislation. Therefore, it was held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, for clearance, and there is no time limit so far as these restrictions are concerned. The arbitrators noticed that the restriction set by the RBI had created a situation in which the appellants had difficulty in arranging the opening of letters of credit so as to conform with the terms of the contact although it could be noted that many applications were submitted by the appellant to the Bank of Baroda after the contractual deadline; that several shipments were made against the letter of credit opened after the contractual deadline; that thus it had been established by the documentary evidence to both contract Nos. S142 and S336 that declaration of force majeure clause was present though belatedly. The arbitrators ultimately concluded that the RBI directives interfered with the contract Nos. S142 and S336 which would have the effect of delaying the opening of the letter of credit by the buyer under the specified contracts. The arbitrators were of the opinion that the force majeure clause had no limitation on the period of suspension of the contract while the execution was affected by a valid force majeure; that it had been accepted by both the parties and that the restric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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