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1963 (5) TMI 45

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..... the present stage. The appellants are Badat & Co., a firm formerly carrying on business at Bombay. The respondents, East India Trading Co., are a private limited company incorporated under the laws of the State of New York in the United States of America and having their registered office in the State of New York. The respondents instituted Suit No. 71 of 1954 against the appellants in the High Court of judicature at Bombay, in its Ordinary Original Civil Jurisdiction, for the recovery of a sum of Rs. 92,884/4/10 with interest thereon.   It was alleged in the plain that by correspondence, the details whereof were given in the plaint, the appellants agreed to do business with the respondents on the terms of the American Spice Trade Association contract. Thereafter, by subsequent correspondence the parties entered into two different contracts where under the appellants agreed to sell to the respondents different quantities of Allepey Turmeric Fingers on agreed terms. Though the respondents forwarded to the appellants in respect of the said transactions two contracts in duplicate on the standard form issued by the said Trade Association with a request to the appellants to send .....

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..... ges held that the awards did not merge in the judgment, that the suit on the awards was maintainable and that the Bombay High Court had jurisdiction to entertain the suit as part of the cause of action arose within its limits. The learned Judges further held that all the facts necessary to sustain the respondents' suit on the awards had been proved either by public documents produced in the case or by the admissions made by the appellants in the written-statement. The present appeal, as aforesaid, has been preferred by certificate against the judgment of the division Bench. The learned Solicitor General, appearing for the appellants, raised before us the following points: (1) The awards merged in the judgment made by the Supreme Court of the State of New York and, therefore, no suit would lie on the awards. (2) Even if the suit could be filed on the awards, it was not proved that any part of the cause of action accrued within the jurisdiction of the Bombay High Court.   To state it differently, the respondents have not proved that the agreements resulting were entered into or concluded within of the Bombay High Court. And (3) failed to prove the three necessary enforcemen .....

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..... at the original debt or cause of action had not merged in the foreign judgment pronounced upon it. Whatever may be the origin, the doctrine of non-merger of the original cause of action with the foreign judgment has now been well established in spite of the fact that some text-book writers are not able to discover a logical basis for the doctrine. In "Smith's Leading Cases", the learned author says:   "Foreign judgments certainly do not occasion a merger of the original ground of action." In Cheshire's Private International Law, 5th Edn., the learned author says in Ch. XVII under the heading "Foreign Judgments", thus, at p. 598 : "It is a rule of domestic English law that a plaintiff who has obtained judgment in England against a defendant is barred from suing again on the original cause of action. The original cause of action is merged in the judgment-transit in rem judicatum and it would be vaxatious. To subject the defendant to another action for the purpose of obtaining the same result. It has been held, however, in a series of authorities, that this is not so in the case of foreign judgments. Such a judgment does not, in the view of English law, occasion a -merger of t .....

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..... 11 of the Act." In Halsbury's Laws of England, Vol. 11 3rd edn., the following note is given at p. 52 : "A foreign arbitration award which is complete and enforceable in the country in which it was made is enforceable in England at Common Law." The learned Solicitor-General seeks to (raw a subtle distinction between an award made by foreign arbitrators which require an enforcement order to render it enforceable by the local law and an award which could not be enforced except by obtaining a judgment on its basis. On this distinction an argument is advanced, namely, that in the case of the former the award has been vitalized by, the enforcement order, while in the case of the latter the award qua the Judgment has not become enforceable, but it is the judgment that becomes enforceable. In support of this contention reliance is placed upon the following, observations found in Dicey's Conflict of Laws, 17th edn., at p. 1059: "If the foreign award is followed by judicial proceedings in the foreign country resultants in a judgment of the foreign court which it not merely a formal order giving leave to enforce the award, enforcement proceedings in England must be brought on the foreign .....

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..... n Law an enforcement order was necessary before an award can be enforced. But no such order was made there. The High Court rejected the counter claim. In doing so, it made the following observations: "The sole point, therefore, remains whether the award is a decision which the court here ought to recognise as a foreign judgment. In my opinion it is not, although as between the parties it is conclusive upon all matters thereby adjudicated upon, and is therefore in a different category to the "remate" judgment dealt with by the House of Lords in Nouvin v. Freeman (1889) 15 App. Cas. 1 ; it has no further force or effect unless and until the court determines that it is an adjudication made in proceedings regularly conducted upon matters really submitted to the jurisdiction of the tribunal. 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." This passage in clear terms brings .....

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..... leted in the manner prescribed by the law of that country. I shall now take the third question, for the discussion thereon would also solve the problem raised by the second question. The learned Solicitor-General contends that there is no proof of the facts to satisfy the aforesaid three conditions and the Division Bench of the High Court went wrong in holding to the contrary on the basis of the alleged admissions found in the pleadings. Mr. Setalvad, learned counsel for the respondents, on the other hand, while conceding that the said three conditions must be satisfied before a foreign award can be enforced, argues that the relevant facts were proved not only by the admissions made by the appellants in the written-statement, expressed or implied, but also by the production of the certified copy of the judgment of the foreign court. In Norake- Atlas Insurance Co. Ltd. v. London General Insurance Company Limited (1927) 43 T.T.R. 541., in award made in Norway was sought to be enforced in England. Action was brought not on the contract but on the award. MacKinnon J., laid down in that case that three things had to be proved for obtaining a decree thereon, namely, (1) the submission .....

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..... by such admission. These three rules form an integrated code dealing with the manner in which allegations of fact in the plaint should be traversed and the legal consequences flowing from its noncompliance. The written-statement must deal specifically with each allegation of fact in the plaint and when a defendant denies any such fact, he must not do so evasively, but answer the point of substance. If his denial of a fact is not specific but evasive, the said fact shall be taken to be admitted. In such an event, the admission itself being proof, no other proof is necessary. The first paragraph of r. 5 is a re-production of O.XIX, r. 13, of the English rules made under the Judicature Acts. But in mofussil Courts in India, where pleadings were not precisely drawn, it was found in practice that if they were strictly construed in terms of the said provisions, grave injustice would be done to parties with genuine claims. To do 'Justice between those parties, for which Courts are intended, the rigor of r. 5 has been modified by the introduction of the proviso thereto. Under that proviso the Court may, in its discretion, require any fact so admitted to be proved otherwise than by such a .....

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..... dings without stating the circumstances. As far as I am concerned, I mean to give the fullest effect to that rule.   I am convinced that it is one of the highest benefit to suitors in the Court."   It is true that in England the concerned rule is inflexible and that there is no proviso to it as is found in the Code of Civil Procedure. But there is no reason why in Bombay on the original side of the High Court the same precision in pleadings shall not be insisted upon except in exceptional circumstances. The Bombay High Court, in Laxminarayanan v. Chimniram Girdhai Lal [1917] I.L.R. 41 Bom. 89, 93., construed the said provisions and applied them to the pleadings in a suit filed in the court of the joint Subordinate Judge of Ahmednagar. There the plaintiffs sued to recover a sum of money on an account stated. For the purpose of saving limitation they relied in their plaint upon a letter sent by the defendant-firm. The defendants in their written statement stated that the plaintiffs's suit was not in time and that "the suit is not saved by the letter put in from the bar of limitation". The question was raised whether in that state of pleadings, the letter could be taken as .....

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..... ntiffs 30 tons of Alleppey Turmeric Fingers at 221 cents per lb. C. & F. New York less 2 per cent March/April shipment. On the same day the plaintiffs cabled to the defendants their acceptance of the said offer. By their cable dated 7th March, 1949 the defendants offered to sell to the plaintiffs further 30 tons of Alleppey Turmeric Fingers at 22 cents per lb. C. & F. New York less 2 per cent March/April shipment. On the same day the plaintiffs cabled to the defendants their acceptance of the said offer. By their letter dated 8th March 1949 the defendants confirmed the said contract arrived at between the parties on 3rd March, 1949. By their letter dated 9th March, 1949 the plaintiffs confirmed both the said contracts and further intimated to the defendants that they had opened the necessary letters of credit. The plaintiffs forwarded to the defendants in respect of the said transactions two contracts in duplicate on the standard form issued by the said American Spice Trade Association with a request to the defendants to return to the plaintiffs a copy of each of them after signing the same. The defendants, however, failed and neglected to do so. The plaintiffs crave leave to refe .....

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..... hat they at any time agreed to do any business or enter into any contract with the plaintiffs as alleged therein or otherwise. The defendants say that they did not at any time sign nor were they bound to sign the said American Spice Trade Association Contract and that they are not therefore bound by or concerned with the terms and/or conditions of the said contract. The defendants deny the rest of the statements contained in the said paragraph." It will be seen from the said paragraphs that though the defendants denied that at any time they entered into a contract with the plaintiffs as alleged in the plaint or otherwise, they have not denied that the letters particularized in the plaint passed between the parties. Learned Solicitor General relied upon the expression "as alleged" in paragraphs 7 and 8 of the written statement and contended that the said words implied necessarily that the defendants denied the passing of the correspondence. No such necessary implication can arise from the use of the said expression. That expression is consistent with the admission bv the defendants of the passing of the letters mentioned in paragraphs 2 and 3 of the plaint, coupled with a denial t .....

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..... there is no denial of this correspondence. Indeed there could not be, because before the Written Statement was filed inspection was given by the plaintiffs of this correspondence and again the conscientious draftsman of the written statement could not possibly have controverted the statement that these letters passed between the parties. Therefore, in our opinion, these two letters of the 7th September, 1948 and 13th September, 1948 are admissible in evidence. and we will formally admit them in evidence."   Then they proceeded to state:   "Now, we read this denial to mean not a denial of the exchange of letters and telegrams, not a denial of the correctness of the copies of the documents of which the Defendants have taken inspection, but a submission in law that no contract emerges from the exchange of these letters and telegrams. For the reasons already given by me, I entirely agree with the view expressed by the Division Bench on the interpretation of the pleadings and hold that the said letters have been rightly admitted in evidence. If the said letters can go in as evidence, the first condition, namely, the factum of submission has been proved in this case. As r .....

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..... aining to submission, that in the absence of specific denials it must be held that it is admitted that the awards were made in strict compliance with the terms of submission. Now coming to the third condition, namely, the proof of the fact that the awards are valid according to the law of the country where they were made, the same equivocal attitude is adopted by the defendants in their written statement. In para 8 of the plaint there is the following specific allegation in that regard: "........ the said arbitration having been duly held and the said awards having been duly made, signed, acknowledged and published according to the said rules and the laws of the State of New York, and the defendants not having taken steps to have the said awards or either of them set aside or modified., as provided in the said rules and by the laws of the State of New York, the said awards are binding on the defendants and the defendants are now precluded and estopped from disputing the same." Here there is a definite averment that the awards were made according to the laws of the State of New York. In the written statement of the defendants, though they generally deny that the awards are bindin .....

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..... itted by the defendants in their pleadings and that, therefore, they need not be independently proved. I would go further and hold that the said three conditions are also proved by Ex. X-9, The said exhibit is the record of proceeding of the Supreme Court of the State of New York relating to the arbitration between the plaintiffs and the respondents. That record contains the certificate issued by the Counsul General, and other papers relating to the proceedings including the order and judgment of the said Supreme Court. The Certificate reads thus: "THIS IS TO CERTIFY (a) that the annexed proceedings have been duly had in accordance with the laws of the State of New York. (b) that the annexed proceedings are duly certified by the officer having the legal custody of the originals thereof at the time such annexed proceedings were issued by the Supreme Court of New York. (c) that the several persons named in the annexed proceedings as holding the respective offices stated therein in respect of each of them did in fact bold such respective office at the time the same took place. The Consulate-General of India assumes no responsibility for the contents of this document. Dated: New .....

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..... er commonly in use in that country for the certification of copies of judicial records..............." It is not disputed that the copy of the Judgment is certified by the legal keeper of the original within the meaning of s. 78(6) of the Evidence Act; nor is it contended that there is no certificate under the seal of an Indian Consul certifying that the copy is certified by the officer having the legal custody of the original. But what is contended is that under s. 78(6) of the Evidence Act three conditions must be complied with before the judgment can be admitted in evidence and the third condition, namely, proof of character of the document according to the law of the foreign country, is not forthcoming in this case. A perusal of s. 78(6) of the Evidence Act makes it clear that apart from the two certificates-one by the legal keeper of the original documents and the other by the Consul-General there shall also be proof of the character of the document according to the law of the foreign country before the document is admitted. It is a condition precedent. The short question, therefore, is whether there is such proof in this case. Proof can be by direct or circumstantial eviden .....

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..... ain the suit. Clause 12 of the Letters Patent for Bombay enables a party to file a suit with the leave of the Court, if the cause of action arises in part within the local limits of the ordinary original Jurisdiction of the said High Court. The cause of action in the plaint is given as follows: "........ the terms of business were accepted by the defendants in Bombay and the proposal or acceptance of the said contracts by the defendants took place in Bombay. The defendants' refusal to pay the said sum also took place in Bombay." On those allegations the leave of the High Court of Bombay was obtained and the suit was filed in the said Court. I have already pointed out that in the case of a claim based on an award, it is in effect a claim to enforce the award on the footing that the submission implied a contract to give effect to the award. I have also held that all the necessary documents relating to the preliminary as well as subsequent contracts are admitted in the written statement. The said documents clearly establish that the parties agreed that their disputes under the contracts should be submitted to arbitration in the manner prescribed by the rules of the American Spices .....

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..... ssociation with a request to the defendants to return to them a duly signed from in respect of each of the transactions and their grievance is that the defendants failed to comply with the request. The plaintiffs further aver that though they opened letters of credit, the defendants committed a breach in respect of both the contracts by failing to supply turmeric. The plaintiffs have alleged in para 3 of the plaint that the defendants were well aware of and knew what the terms and conditions of the American Spice Trade Association were. One of the terms of the Association which they have set out is 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 thereof. This contract is made as of in New York." In pursuance of this term, the plaintiffs who had declared the defendants in default appointed one Edward B. Polak as their Arbitrator and on May 24, 1949, called upon the defendants to appoint an arbitrator on their behalf. They also informed the defendants that if they failed to do so, they, the plaintiffs, would r .....

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..... ween the parties arising under or out of the said contracts in accordance with the practice of an Court having jurisdiction. Alternatively they have contended that if the Court held that the judgment was not a judgment of a foreign Court on which action would lie in the High Court the defendants having by the terms of the said contracts expressly agreed to have any dispute arising under the contracts settled by arbitration in New York under the rules of the Spice Trade Association and the arbitration upon which the awards arc founded having been duly made and published according to the rules and laws of the State of New York and further having become final are binding on the defendants, the defendants are bound to carry out the terms of the said awards and to pay to the plaintiffs the sums awarded under them. Thus the suit is substantially based on a foreign judgment and in the alternative on the two awards given by a domestic tribunal functioning in New York. The defendants raised a number of pleas in defence. In the first place they said that they did not reside within the limits of the original jurisdiction of the High Court or carry on business therein and the High Court had .....

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..... d no jurisdiction." No doubt, the learned Chief Justice has further said that it was unnecessary to decide the matter finally because in his view the plaintiffs were entitled to the relief claimed on the basis of the awards. We may point out that Mr. Setalvad, who appeared before us for the plaintiffs, did not challenge the finding of the appeal court on this point and did not seek to argue that the judgment of the Supreme Court could furnish a cause of action to the plaintiffs in respect of the present suit. We entertain no doubt as to the correctness of the view that the plaintiffs are not entitled to enforce the judgment of the Supreme Court against the defendants by a suit instituted on the original side of the High Court and therefore, we should ordinarily have let the matter rest there. Our reasons for agreeing with the High Court's conclusion on the point are, however, different and, therefore, it is necessary for us to state them. Before we do so, it would be desirable to examine the position regarding the enforcement of foreign awards and foreign judgments based upon awards. Under the Arbitration Protocol and Convention Act, 1937 (VI of 1937), certain commercial awards m .....

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..... rights given by Part II of the Act. (Arbitration Act, 1950-14 Geo. 6, c. 27)." Dealing with actions upon foreign awards at common law, it is stated further at p. 283 thus: "To succeed in such an action the plaintiff must prove:- (1) That there was an arbitration agreement   (2) That the arbitration was conducted in accordance with that agreement; and   (3) That the award was made pursuant to the provisions of the agreement and is valid according to the lex fori of the place where the arbitration was carried out and where the ward was made.   If the award is validly made in consequence of a valid arbitration agreement, a sum found due by the award and unpaid may be sued for in an action upon the agreement." Thus commercial arbitration awards, though based on a contract to arbitrate are not contracts and although they are decisions they are not judgments. Even though that is so, it has been held in several cases in England that even where an award has not been reduced to a judgment in a foreign country it can be enforced in England provided, of course, the award answers mutatis mutandis the tests for determining the enforceability of foreign judgments. Thus, th .....

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..... s followed by judicial proceedings in the foreign country resulting in a judgment of the foreign court which is not merely a formal order giving leave to enforce the award, enforcement proceedings in England must be brought on the foreign judgment or possibly on the original cause of action but probably not on the award. If the foreign judgment has the character of a formal order giving leave to enforce the award it is doubtful whether the foreign award or the foreign order is to be enforced in England. If the distinction between foreign judgments on the award and foreign formal enforcement orders can be maintained in practice, then, it is believed that the foreign award and not the foreign order, will be enforced in England, if the enforcement order is purely formal. 4. For the purpose of enforcing a foreign award plaintiff must prove only (1) submission, (2) compliance with the submission in the conduct of an arbitration and (3) the validity of the award according to the law of the country where it was made. This is also laid down in Norske Atlas Insurance Co. Ltd., v. London General Insurance Co., Ltd., (1927) 43 T.L.R. 541., and according to the learned author this decisio .....

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..... e of action. The second principle is that even a foreign award will be enforced in England provided it satisfies mutatis mutandis the tests applicable for the enforcement of foreign judgments on the ground that it creates a contractual obligation arising out of submission to arbitration. On two matters connected with this there is difference of opinion. One is whether an award which is followed by a judgment can be enforced as an award in England or whether the judgment alone can be enforced. The other is whether an award which it not enforceable in the country in which it was made without obtaining an enforcement order or a judgment can be enforced in England or whether in such a case the only remedy is to sue on the original cause of action. The third principle is that a foreign judgment or a foreign award may be sued upon in England as giving good cause of action provided certain conditions arc fulfilled one of which is that it has become final. Bearing in mind these principles let us consider whether the judgment of the Supreme Court could be enforced against the defendants by instituting a suit on the original side of the High Court. The appeal court has, as already stated t .....

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..... ibunals are enforced in England is that stated by Parke B. in Russel v. Smyth, and again repeated by him in Williams v. Jones that the judgment of a court of competent jurisdiction over the defendant imposes a duty or obligation on the defendant to pay the sum for which judgment is given, which the courts in this country are bound to enforce.......... As James L. J., has said in Re Davidson's Settlement Trusts (1873) L.R./E. & 383, 386, "It would be impossible to carry on the business of the world if courts refused to act upon what has been done by other courts of competent jurisdiction." Schmitthoff in The English Conflict of Laws, 3rd edn. has stated at p. 459 : "The English courts recognise that a foreign judgment gives rise to private rights which, on principle, should be protected by them. Consequently, when referring to the recognition of a foreign judgment, what is actually meant is the recognition of the private right that is created by the judgment and not the enforcement of a foreign judicial act of State. In the words of Professor Read "Recognition and enforcement of foreign judgments (1938)" by Prof. Read. Quoted by Schmitthoff in "The English Conflic; of Laws" 459. .....

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..... pointed out that this is not the view generally adopted by the courts in the United States of America as would appear from the following passage from Lorenzen's "Cases on Conflict of Laws" 4th edn. P. 1090: "As a judgment of a foreign country is held not to merge the original cause of action, it would follow that an action might be brought upon the award, notwithstanding the fact that it has been converted into a judgment abroad." This question was left open by the Privy Council in L. Oppenheim & Co., v. Mahomed Haneef  I.L.R. 45 Mad. 496., as it had not been raised in that case. The recognition given to a foreign judgment by the English Courts is, as pointed 'out -by Schmitthoff at p. 459 of the English Conflict of Laws, not based upon the doctrine of merger. For, this doctrine does not apply to judgments of courts which are not courts of record in the English sense. It may be that founded as the American legal system is on the common law of England the New York Supreme Court would be a court of record in the English sense and, therefore, the doctrine of merger could be said to apply to a judgment recorded by it. However, as no contention was raised before us that the Supre .....

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..... as made;   (4) that it was final according to the law of that country; and   (5) that it was a subsisting award at the date of suit.   A. view has been expressed in some English cases that an award must also be enforceable in the country in which is was made before a suit call be brought, in England on its basis. But upon the view we are taking it is not necessary to decide this point. Now, when a suit is brought by a plaintiff on the basis of an award it is not necessary for him to prove that the amount claimed was actually payable to him in respect of the dispute nor is it open to the defendants to challenge the validity of such an award on grounds like those which are available in India under s. 30 of the Arbitration Act. A very limited challenge to the claim based on the award is permissible to the defendants and that is one of the reasons why it is important to ascertain whether the award has in fact attained finality in the country in which it was made. We will assume that the plaintiffs have satisfactorily established the first three of the five conditions which we have set out above. The question then is whether the fourth and the fifth conditions have bee .....

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..... hout obtaining a judgment from a Danish Court -and that during the proceedings before such court it would be open to the defendant to complain that the award suffered from formal defects but nothing else. Thus, in this case the Court of Appeal has drawn a distinction between 'finality' and enforceability of an award and held that where under the laws of the country in which an award has been made, it is no longer open to challenge it on merits it must be regarded as final even though in the form in which it stands it may not be enforceable there. Rule 15, cl. (E) of the American Spice Trade Association whereunder the awards in the plaintiff's favour were made runs thus; "The award of such arbitrators and umpire or sole arbitrator shall be final and binding on both parties unless within three business days after receipt of the award, an appeal with a fee $75 be lodged with the Secretary of the Association by either disputant. Settlements under an arbitration award or awards of the Arbitration Committee shall be made within 10 days from the date of such award, and if not so settled, judgment may be entered therein in accordance with. the practice of any Court having jurisdiction." .....

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..... eptember 1, 1952, has been set out. Section 1461 which deals with confirmation of an award runs thus: "Motion to confirm award: At any time within one year after the award is made, as prescribed in the last section, any party to the controversy which was arbitrated may apply to the court having jurisdiction, as provided in section fourteen hundred fifty-nine for an order confirming the award; and thereupon the court must grant such an order unless the award is vacated, modified or corrected, as prescribed in the next two sections or unless the award is unenforceable under the provisions of section fourteen hundred fifty-eight. Notice of the motion must be served upon the adverse party or his attorney, as prescribed by law -for service of notice of a motion upon an attorney in an action in the same court. In the Supreme Court, the motion must be made within the judicial district embracing the country where the judgment is to be entered." Then follows s. 1462 which deals with a motion to vacate award; s. 1462-a which deals with a motion to modify or correct an award; s. 1463 which deals with 'notice of motion and stay'; s. 1464 which deals with 'entry of judgment on award and costs .....

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..... red." From all these provisions it would be abundantly clear that the award has no finality till the entire procedure is gone through and that the award as such can never be enforced. What is enforceable is the judgment. There is no provision in the law providing for taking proceedings for the confirmation of an award in which all objections to the award could be made except s. 1461. The proceedings taken thereunder must, however, culminate in a judgment. In this respect the procedure under the law of the New York State is quite different from that under the Arbitration law of Denmark. Apparently, that is why the plaintiffs, after obtaining the awards, went up to the Supreme Court of New York for obtaining a judgment confirming the awards. No doubt, as a result of the judgment the decision of the arbitrators became unchallengable in the New York State and for all practical purposes in India as well but in the process the award made by them has given way to the judgment of the Supreme Court of New York. It is this judgment which can now furnish a cause of action to the plaintiffs and not the awards. No doubt, an award can furnish a fresh cause of action. But the award must be fin .....

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