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1963 (5) TMI 45

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..... aintainable on the awards, though not on the judgment, as part of the cause of action had arisen in Bombay and the relevant facts had been proved by the Public documents produced by the respondent and the admissions made by the appellant and decreed the suit. Held, (per Dayal and Mudholkar JJ.) The decision of the Single judge of the High Court that the suit was not maintainable on the foreign judgment must be affirmed but on other grounds. - Civil Appeal No. 39 of 1961 - - - Dated:- 10-5-1963 - SUBBARAO, K. DAYAL, RAGHUBAR MUDHOLKAR, J.R. JJ. JUDGMENT: C.K. Daphtary, Solicitor-General of India, S.N. Andley, Rameshwar Nath, P.L. Vohra and I. B. Dadachanji, for the appellant. M. C. Setalvad, Atul Setalvad, V.I. Merchant and G. Gopalkrishnan, for the respondent. Subba Rao J., delivered a dissenting Opinion. The judgment of Dayal and Mudholkar JJ., was delivered by Mudholkar J. SUBBA RAO J. -I regret my inability to agree with the judgment prepared by my learned brother Mudholkar J. This appeal by certificate raises the question of Jurisdiction of the Bombay High Court to entertain a suit on an award in respect whereof a judgment was made in a foreign court .....

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..... e appellants to the respondents. The suit was tried, in the first instance, by Mody J. The learned judge, inter alia, held that the suit on the foreign judgment would not lie in the Bombay High Court, as there was no obligation under the said judgment for the appellants to pay any amount to the respondents at any place within the jurisdiction of the Bombay High Court. Adverting to the claim based on the agreement resulting in the awards, the learned Judge observed that there was no proof of such agreement and that there were no admissions in the written-statement in regard to the facts sustaining such an agreement. On those findings he held that the respondents had failed to prove that the Bombay High Court had jurisdiction to try the suit. As the suit was heard on merits also, he considered other issues and held that there was neither proof nor admissions in the written-statement in regard to the alleged contracts. He found that the arbitrators and the umpire had jurisdiction to make the awards, but the said awards merged in the judgment and that the suit was not maintainable on the said two awards. It is not necessary to give the other findings of the learned judge, as nothing tu .....

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..... Foreign judgments" thus: " Since the foreign judgment constitutes a simple contract debt only, there is no merger of the original cause of action, and it is therefore open to the plaintiff to sue either on the foreign judgment or on the original cause of action on which it is based, unless the foreign judgment has been satisfied." The same idea is expressed in Dicey s "Conflict of Laws", 7th edn., at p. 1059: "For historical and procedural reasons, a foreign judgment is treated in England as a contractual debt, and the fact that, in certain instances, it can be enforced by registration does not appear to alter the traditional view." Though the learned author in the course of his commentary criticizes this view, the passage represents the accepted view on the subject. An interesting discussion of the evolution of the rule of non-merger of the cause of action in the foreign judgment is found in Piggott s "Foreign judgment", Part I at p. 17. The various steps in its evolution may be stated thus: (1) Action brought on a foreign judgment was an action brought to recover the judgment debt :...... necessarily then, the judgment must be evidence of the debt. (2) It was not made .....

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..... between the parties. The doctrine of non-merger has. however, been too often repeated by judges to justify any prospect of its abandonment." This doctrine has been accepted and followed by Indian Courts: see Popat v. Damodar, Oppenheim and Company v. Mahomed HanEef and Nil Ratan Mukhopadhyaya v. Cooch Behar Loan Office, Ltd... If the contract does not merge in a judgment, by parity of reasoning, the award on which a foreign judgment is made cannot also merge in the judgment. While conceding the said legal position, the learned counsel for the appellant contends that the award to furnish a valid cause of action shall be one which is legally enforceable in the country in which it is made. An award made in New York, the argument proceeds, by its own force does not create rights or impose liabilities thereunder and therefore, such an inchoate document cannot afford a cause ,of action. This contention has not been raised for the first time, but has been noticed in "Russel On Arbitration", 16th Edn. and answered it p. 282. The learned author places the following two propositions in juxtaposition : (1) "An award made by foreign arbitrators, which requires an enforcement order to re .....

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..... hereafter the judgment only becomes enforceable. But, as explained earlier, there is no merger in the context of its enforcement in another country. In both the cases the award in the country of its origin is complete and enforceable. If an award gets vitality by a mere enforcement order, it gets a higher sanctity by the court of its origin making a judgment on it. Both of them afford a guarantee of its vitality and enforceability in the country of its origin and, therefore, a different country can safely act upon it. In both the cases the award is complete in the country of its origin and if the doctrine of merger cannot be invoked in the case of foreign judgment, as I have held it cannot, there is no principle on which the distinction sought to be made can be sustained. To sanction the distinction in the context of a foreign judgment is to prefer the form to substance and to accept a lesser guarantee and reject a higher one. The decision in Merrifield, Ziegleis-, and Co., v. Liverpool Cotton -Association Limited (1911) 105 L.T.R. 97, 106., does not lay down any different proposition. There, the plaintiff brought an action in England against Liverpool Cotton Association for re .....

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..... England filed a suit on the award on the King s Bench Division of the High Court in England for the amounts payable thereunder and obtained an ex-parte judgment against the merchant at Madras. Thereafter, they brought a suit against the Madras merchant in the High Court of judicature at Madras claiming the sum due under the said judgment, or in the alternative, for the amount due under the award. Coutts Trotter J., who heard the case in the first instance, held that the suit was not maintainable on the judgment that was an ex-parte one, and gave a decree on the award. But on appeal, a Division Bench. of that Court took a different view. On further appeal, the Privy Council restored the decree made by Coutts Trotter J. : but they concluded their judgment with the following caution : "In order to prevent misconception, it appears desirable to add that it was not pleaded or contended at any stage of the proceedings that the award had merged in the English judgment, and accordingly their Lordships do not deal with that point." This decision is certainly an authority for the position that on the assumption that an award does not merge in a foreign judgment, it affords a cause of act .....

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..... and when it arose, and the facts showing the court has jurisdiction. The object is to enable the defendant to ascertain from the plaint the necessary facts so that be may admit or deny them. Order VIII provides for the filing of a written-statement, the particulars to be contained therein and the manner of doing so ; rules 3, 4 and 5 thereof are relevant to the present enquiry and they read : Order VIII Rule 3. It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages. r. 4 where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus if it is alleged that he received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances. Rule 5. Every allegation of fact .....

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..... nventions of a Court wherein such pleadings are filed. In this context the decision in Tildestey v. Harper (1878) L.R. 7- Ch. D. 403., will be useful. There. in an action against a lessee to set aside the lease granted under a power the statement of claim stated that the donee of the power had received from the lessee a certain sum as a bribe, and stated the circumstances; the statement of defence denied that sum had been given, and denied each circumstance, but contained no general denial of a bribe having been given. The Court held, under rules corresponding to the aforesaid rules of the Code of Civil Procedure, that the giving of the bribe was not sufficiently denied and therefore it must be deemed to have been admitted. Fry J. posed the question thus: What is the point of substance in the allegations in the statement of claim ? and answered it as follows : "The point of substance is undoubtedly that a bribe was given by Anderson to Tildesley, and that point of substance is nowhere met............ no fair and substantial answer is, in my opinion, given to the allegation of substance, namely that there was a bribe. In my opinion it is of the highest importance that this rul .....

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..... l side of the Bombay High Court should also be strictly construed, having regard to the provisions of rr. 3, 4 and 5 of Order VIII of the Code of Civil Procedure, unless there are circumstances wherein a Court thinks fit to exercise its discretion under the proviso to r. 5 of O.VII. The first condition for the enforceability of an award is the proof of submission to arbitration. A claim based on an award is in effect a claim to enforce the award on the footing that the submission implied a contract to give effect to the award. In the plaint the details of the preliminary contract between the parties containing an arbitration clause has been specifically and precisely stated in paras 2 and 3. As much of the argument turns upon the said allegations, it may conveniently be read here. "2. By their letter- dated 7th September 1948 the plaintiffs intimated to the defendants that they were prepared to do business with them on the terms of the American Spices Trade Association contract, net landed weights, less 1-1/2 per cent. discount, letter of credit to be opened for 95 per cent. of the amount of the transaction and the balance to be settled immediately after the goods were weighed .....

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..... acts and were well aware of and knew what the terms and conditions of the said American Spice Trade Association Contract were. One of the said terms was as follows:- "All questions and controversies and all claims arising -under this contract shall be submitted to and settled -by Arbitration under the Rules of the American Spice Trade Association printed on the reverse side hereof. This contract is made as of in New York." Then the plaint proceeds to give how the dispute should be referred to arbitration and how arbitrators and umpire should be appointed by the parties. From the said allegations in the plaint it is clear that the plaintiffs have precisely -and definitely given the particulars of the correspondence that passed between the parties on the basis of which they claimed the preliminary contract containing an agreement to submit their dispute to arbitration and the subsequent contracts in respect of the goods made and concluded between the parties. The defendants, adverting to the said allegations dealt with them in paragraphs 7 and 8 of their written statement. The said paragraphs read : "7. With reference to paragraph 2 of the plaint the defendants deny that they .....

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..... regard to the said correspondence. On this aspect of the case, to some extent, there is unanimity between Mody J., and the learned Judges of the Division Bench of the Bombay High Court. Adverting to para 7 of the written statement, Mody, J., says "In my opinion, paragraph 7 of the written statement does not at all, directly or indirectly, specifically or by implication, deal with any of the said three statements of facts. A denial of a contract is not a denial of the receipt or of the contents of the said letter dated 7th September 1948 or the writing of the letter dated 13th September 1948. The defendants can conceivably admit the said three statements of fact but still deny that any contract resulted thereby. Therefore the said three statements of facts must be deemed to have been admitted." Dealing with para 8 of the written statement, the learned judge says that these two statements of facts have not been pleaded to in the written statement and must, therefore, be deemed to have been admitted. But having gone so far, the learned Judge rules against their admissibility on the ground that there are no allegations that the defendants wrote the letters attributed to them and th .....

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..... ndants had committed a breach of the said two contracts and awarded that the defendants should pay to the plaintiffs specific amounts in respect of the said contracts as and by way of damages. Paragraph 7 of the plaint describes how the defendants did not meet the demand, how proceedings were taken before the Supreme Court of the State of New York, how notice of the said proceedings was duly served on the defendants and how the said Court pronounced its judgment confirming the said awards. Paragraphs 9, 10, 11 and 12 of the written statement deal with the said allegations. In the said paragraphs the defendants do not deny the factum of the appointment of arbitrators and the procedure followed by 4-2 S C India/64 them in making the awards. They are content to say that they are not bound by or concerned with the appointment of the arbitrators by the plaintiffs as alleged therein or other-wise, that they are not bound by or concerned with any of the statements contained in para 7 of the plaint and that the awards passed by the arbitrators and the umpire are not binding on them. As regards the allegations in para 7 they only say that the arbitrators acted without jurisdiction and that .....

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..... th a copy of the awards and the order of the Court to show cause. With the knowledge of the contents of the copies of the letters and the contents of the awards, the Advocate for the defendants rightly and properly was not in a position to deny the factual aspect of the passing of the letters and the making of the awards and the delivery of the judgment by the Supreme Court of the State of New York confirming the said awards. That is why the written statement contained vague and general denials only specifically raising disputes on legal questions, and designedly giving equivocal answers to factual aspects. It is said that no inference of tacit acceptance on the part of the defendants or their counsel can be drawn, for the defendants Advocate, after inspection of the documents, asked the plaintiffs Advocate to produce the originals, but the plaintiffs failed and neglected to do so. But this circumstance does not detract from the knowledge of the defendants and their Advocate of the existence of the said documents and their contents before the written statement was drafted. This circumstance gives a satisfactory explanation for the vagueness of the allegations in the written state .....

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..... mely, that there was a submission, that the arbitrators gave the awards in terms of the submission and that a judgment was made on those awards on the ground that the awards were made in accordance with law. But it is argued by the learned Solicitor-General that the said judgment has not been proved in the manner prescribed by the Indian Evidence Act. The relevant sections of the Evidence Act may now be read : Section 74 : The following documents are public documents :- (1) documents forming the acts, or records of acts- (iii) of public officers, legislative, judicial and executive of any part of India or of the Commonwealth or of a foreign country. Section 78: The following public documents may be proved as follows:- (6) Public documents of any other class in a foreign country, By the original, or by a copy certified by the legal keeper, thereof with a certificate under the seal of a notary public, or of an Indian Consul or diplomatic agent, that the copy is duly certified by the officer having the legal custody of the original, and upon proof of the character of the document according to the law of the foreign country." Section 86 : The Court may presu .....

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..... before the said record is admitted. The document may be looked into for the purpose of ascertaining whether there is the requisite certificate, viz., a certificate issued by any representative of the Central Government in the concerned country to the effect that the said document was certified in the manner commonly in use in that country for the certification of copies of judicial record. If the distinction between the certificate and the judgment is borne in mind, the fallacy of the argument becomes apparent. The requisite certificate makes the document admissible and not viace versa. If there was such a certificate forthcoming-in this case there is such a certificate-the document may be presumed to be genuine and accurate. If it is presumed to be genuine and accurate, it shows its character, viz., that it is a genuine judgment made by the Supreme Court of New York. This is a fit case for raising the said presumption and with the aid of this presumption the third condition is also complied with i.e., it is a judgment of the Supreme Court of the State of New York made in accordance with law. As the three conditions laid down in S. 78(6) of the Evidence Act are fulfilled, the do .....

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..... ts on the basis of a judgment of the Supreme Court of New York affirming awards given by a domestic tribunal or alternatively on the awards themselves. The plaintiff-company was incorporated in the State of New York and among other things, engages in the import of spices. The defendant-company, was a partnership firm and at the relevant time was carrying on import and export business in Bombay. According to the plaintiffs, by two letters dated September 7, 1948, and September 13, 1948, the first written by the plaintiffs and the second by the defendants, the parties agreed to do business upon the terms of the American Spice Trade Association. One of the terms agreed between the parties was that the plaintiffs at the time of placing an order for the supply of spices with the defendants were to open a letter of credit to the extent of 95 per cent of the value of the commodity ordered to be supplied and the balance to be settled immediately after the goods were weighed and delivered. By their cable dated March 3, 1949, the defendants offered to sell to the plaintiffs 30 tons of Alleppey Turmeric Fingers at a certain rate, to be shipped in March/April. This offer was immediately acce .....

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..... ules of the Association. Thereafter the Arbitrators and the Umpire entered upon arbitration and gave two awards, in the sum of $9,538.64 in respect of the first contract and in the sum of $9,209.36 in respect of the second contract by way of damages. The plaintiffs thereupon drew a bill of exchange on the defendants at Bombay for $18,748 being the aggregate sum awarded by the two awards. According to them, though it was presented to the defendants several times in Bombay they "failed and neglected to accept or to pay the same." Then, according to the plaintiffs, they adopted proceedings in the Supreme Court of the State of New York to have the said awards confirmed and judgment entered thereon. Notices of the proceedings were said to have been served on the defendants and judgment confirming the said awards and ordering the defendants to pay $19,554.17, including interest and costs, was pronounced on April 13, 1950. The plaintiffs eventually instituted the suit out of which this appeal arises in the High Court of Bombay on January 14, 1954. According to the plaintiffs, the defendants have, by the terms of the contract voluntarily submitted themselves to the jurisdiction of .....

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..... aling with those contentions. Upon the view we take on the question of the enforceability of the awards in question in the manner sought in this case it is not necessary to advert to those pleadings. It was not disputed before us that the defendants had, at the date of suit, ceased to reside or carry on business within the limits of the original civil jurisdiction of the High Court of Bombay. The appeal court, while holding that the judgment of the Supreme Court of New York cannot be enforced against the defendants in a suit brought on the original side of the High Court took the view that the awards upon which the judgment is based can be enforced because they give rise to a cause of action and a part of that cause of action had arisen in Bombay. The reason why the judgment of the Supreme Court of New York could not be the foundation of the suit is, in the words of the learned Chief Justice, as follows : "The foreign judgment was passed in New York and the defendants did not reside and carry on business within jurisdiction at the relevant date. The only way that jurisdiction could possibly have been attracted was by an averment that there was an obligation under the judgment o .....

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..... eable in England under the common law on grounds of justice, equity and good conscience. We may add that in cases arising on the original side of the High Court of Bombay, English common law is applicable "has nearly as the circumstances of the place and the inhabitants admit" by virtue of cl. 19 of the Letters Patent read with cl. XLI of the Charter of the Bombay High Court. The common law on the subject is crystallised thus as rule 198 in Dicey s Conflict of Laws, 7th edn. at p. 1.056. "Rule 198(1) : A foreign arbitration award which has been rendered enforceable by a judgment in the country where it was given may be enforced by an action as a foreign judgment. (2) A foreign arbitration award which has not been rendered enforceable by a judgment in the country where it was given may be enforced by an action at the discretion of the court if the award is,- (a) in accordance with the terms of the submission agreement; and (b) valid according to the law governing the arbitration proceedings; and (c) (semble) final according to the law governing the submission agreement." The position as summarised in Russel On Arbitration, 16th edn. is set out thus at p. 282 : .....

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..... nd is based not on the award, but on the contractual agreement to submit to arbitration all differences arising out of the original contract, on the ground that the submission to arbitration itself implies a contractual agreement to abide by the award, thereby extinguishing the original cause of action." After stating this, the learned author proceeds to say "It is submitted that no one short formula is satisfactory and that the enforcement of a foreign award involves a complex of questions which must be treated separately." He has then dealt with various decisions in England and also the opinions of certain writers. The conclusions stated in so far as they are relevant to this case are -- 1. In all enforcement proceedings in England the plaintiff must first obtain an enforceable title in England i.e., he must either apply for leave to enforce the award or must bring an action on the award. 2. In an enforcement proceeding in England the action on the award must take the form of a claim in contract. This rule is based upon the assumption that the agreement to perform the award is implied in the submission and that the submission is the contract on which the action is bas .....

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..... gment the learned judge observed: "It is not even as though the award were enforceable unless the court stays its operation ; the contrary is really the case, and for all practical purposes it is stillborn until vitality is infused into it by the court. It is then, for the first time, endowed with one, at least, of the essential characteristics of a judgment-the right to enforce obedience to it." Dicey has pointed out that this is the only case where such a view has been taken and that it was not even referred to in the Norske s case (1927) 43 T.L.R. 541., Nor was it referred to in the Union National case (1959) 2 Q. B. 44. There, a Danish award, though not enforceable in Denmark in the absence of an enforcement order was held by the court of Appeal to be enforceable under the Arbitration Act of 1950 on the ground that it had become final and that under the Danish law only formal objections could be taken to such an award in the proceedings for obtaining an enforcement order. It will thus be seen that there is a conflict of opinion on a number of points concerning the enforcement of foreign awards or judgments, based upon foreign awards. However, certain propositions appear .....

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..... ause of action is really independent of the cause of action afforded by the contract and, therefore, if advantage was sought to be taken of it, the suit would not lie at Bombay. This point does not appear to have come up for a direct decision in any case. We may, however, refer to the decision in East India Trading Co., v. Carmel Exporters Importers Ltd. (1952) 2 Q.B. 439. There, an action was brought in England to enforce a foreign judgment awarding damages for breach of contract and the question for consideration was the relevant date for converting the amount of damages into sterling. After considering the relevant decisions on the point Sellers J., held that the relevant date would be the date of the foreign judgment. The ground given by him was that the plaintiff s cause of action was the foreign judgment and it is that judgment which creates the debt which was enforceable by action in England. The principle underlying this case should also apply to the present one because in both cases the cause of action is founded on foreign judgments, though in the case before us it is founded alternatively, upon foreign awards also. The only difference is that while in. our case t .....

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..... udgment. When he sues upon the original cause of action, no doubt, the court within whose Jurisdiction the cause of action arose would be entitled to entertain the suit. But, if -on the other hand, he chooses to sue upon the judgment, he cannot found jurisdiction for the institution of the suit on the basis of the original cause of action because once he chooses to rest himself on the judgment obtained by him in a foreign court, the original cause of action will have no relevance whatsoever even though it may not have merged in that judgment. Since the judgment with which we are concerned was pronounced in New York the cause of action for a suit based thereon must be said to have arisen at that place. Since that is so, it follows that the cause of action in so far as it rests on the judgment, did not arise within the limits of the original jurisdiction of the High Court of Bombay and the suit based upon that judgment must be held to be beyond the jurisdiction of the Court. The alternative claim of the plaintiffs is for the enforcement of the awards themselves and it is this which the Appeal Court has held to be one which can validly form the basis of the present suit. The lear .....

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..... entered into in London while the award thereunder made at Hamburg in Germany). On the other hand it was contended for the appellant that the award having been made in Hamburg the action for its enforcement in England would not be an action for the enforcement of a contract made in England. Rejecting this contention Slesser L.J., after considering the authorities on the subject observed at p 760: "So far it would appear clear that in the opinion both of common law and equity judges the award is to be regarded as merely the working out of a term of the original agreement of submission.......... and then referred to the following observations of James L.J., in Llanelly Ry. and Dock Co., v. London and North Western Ry. Co., (1873) L.R. 8 Ch. 942, 948.: "It would be difficult to say that the real question between the parties could be determined by the arbitrator under that clause ; because, if the plaintiffs are right in their contention, they have determined that part of the agreement as well as everything else:" Now, when a plaintiff sues upon a foreign award what he in fact does is to ask the court to pass a judgment in his favour for the amount stated in the award only after .....

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..... regulating the procedure of the arbitration chamber, awards are made by a committee of the chamber. Regulation 14 of the rules provides that : awards made by the Committee shall be final. An award can only be appealed against to the appeal court attached to the committee.... If the presidency decides that the appeal can t be made the award made by the judgement and arbitration committee shall be final. By an order of October 6, 1958, the committee awarded to the respondents the sum of $183,000. The presidency of the arbitration committee on November 25, 1958 refused the appellants application for leave to appeal and notified them that the award of October 6, 1958 was final. The award could not be enforced in Denmark without an order of a Danish court. The respondents, by summons under section 36 and 26 of the Arbitration Act, 1950, which applies to arbitration awards made in Denmark, applied for leave to enforce that award. The appellant claimed that the award was a foreign award and had not become final. in the country in which it was made." The contention raised on behalf of the appellants was that the award had not become final in the country in which it was made because .....

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..... reign which has to be obeyed within the territorial limits of that sovereign s jurisdiction. On the principles of comity it is, therefore, accorded international recognition provided it fulfills certain basic requirements. A foreign award, on the other hand, which is founded on a contract of the parties and is not given the status of a judgment in the country in which it is made, cannot claim the same international status as the act of a foreign sovereign. As pointed out by Schmitthoff on the English Conflict of laws, at p. 489: "It follows that unless the plaintiff can satisfy the English court that the award is treated, in the country where it was made, like a judgment of the court he should sue on the original cause of action, but even in that case he should plead the award because it might in appropriate cases, be regarded by the English courts as conclusive between the parties." These observations would perhaps now stand slightly modified by the view taken by the Court of Appeal in the Union Nationale case (1959) 2 Q.B. 44., in the sense that even an award which has not obtained the status of a judgment in the country in which it was rendered but which possesses an essenti .....

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..... ward upon the subject-matter submitted was not made. 5. If there was no valid submission or contract, and the objection has been raised under the conditions set forth in section fourteen hundred fifty-eight." It will thus be seen that despite the finality spoken of by Rule 15E, this section enables the defendants to apply for vacating the award on certain grounds and thus imperil the finality accorded to the award by his contract. It is only after the objections under s. 1462 are disposed of that a judgment putting an end to all controversy, can be entered under s. 1464 which reads thus: "Entry of judgment on award and costs: Upon the granting of an order confirming, modifying or correcting an award, judgment may be entered in conformity therewith, as upon a referee s report in an action, except as is otherwise prescribed in this article. Costs of the application and of the proceedings subsequent thereto; not exceeding twenty-five dollars and disbursements, may be awarded by the court in its discretion. If awarded, the amount thereof must be included in the judgment." After the judgment is pronounced a judgment roll is prepared and the judgment docketed as if it was rende .....

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