TMI Blog2015 (4) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of there being no arbitration agreement between the petitioners and the respondents or that the composition of the arbitral tribunal was not in accordance with the alleged arbitration agreement? - Held that:- There is no substance in the submission of the learned counsel for the petitioners that on the ground that there being no alleged agreement between the parties, the issue of nullity could be raised by the petitioners under section 48 of the Arbitration and Conciliation Act while opposing enforcement of an foreign award. As this court has held that the petitioners not having challenged interim declaratory award as well as final award in accordance with the provisions of English Arbitration Act and both these awards have become final and binding between the parties, no such objection can be allowed under section 48 of the Arbitration and Conciliation Act. In so far as submission of the learned counsel that a party can challenge a composition of arbitral tribunal any time and even under the provisions of section 34 or at the stage of section 48 is concerned, in my view since the petitioners have not challenged the findings and conclusion of the arbitral tribunal reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther effective steps for execution of the same. In the circumstances the claimant is directed to put the award in execution in accordance with the rules of this court. - Arbitration Petition No. 76 of 2012 Alongwith Arbitration Petition No. 12 of 2012 - - - Dated:- 8-4-2015 - R. D. Dhanuka, J. For the Petitioners : U. J. Makhija, a/w. Vishal Talsania, D. N. Motiwalla, Sacha Pandey, Vidhya Baskar, i/b. Motiwala Co. For the Respondents : Zal Andhyarujina, a/w. Shivkumar Iyer, Aditya Krishnamurthy, Arjun Mittal, Shruti Sardesai, i/b.Bose Mitra JUDGMENT The petitioners in Arbitration Petition No.76 of 2012 which is filed under section 34 of the Arbitration and Conciliation Act, 1996 (for short the said Arbitration Act) have impugned the final arbitral award dated 15th September, 2010 and seeks a declaration that there was no valid arbitration agreement between the parties. The petitioners in the said arbitration petition were the original respondents in the arbitral proceedings whereas the respondents i.e. POL India Projects Limited were the original claimants. For the sake of brevity in this order M/s.POL India Projects Limited are described as the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent thereof for the time being in force. Unless the parties agree on a sole arbitrator, one arbitrator shall be appointed by each party and the arbitrators so appointed shall appoint a third arbitrator, the decision of the three-man tribunal thus constituted or any two of them, shall be final. On receipt by one party to the nomination in writing of the other party's arbitrator, the party shall appoint their arbitrator within 14 days, failing which the decision of the single arbitrator appointed shall be final. In clause (25) of the charter party, it was provided as under :- 25. Law and Arbitration (state 19(a), 19(b) or 19(c) of Cl.19 if 19(c) agreed also state Place of Arbitration) (if not filled in 19(a) shall apply) (Cl.19) In the said charter party agreement in column (25), the parties have mentioned 'London'. The petitioners on behalf of the said D.B.Shipping LLC forwarded a rider to the charter party agreement. The said rider was signed by the petitioners. Clause 52 of the rider is extracted as under :- GA/arbitration in London as per London Arbitration Council . 7. It was the case of the respondents that the said D.B.Shipping LLC committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter passed ex parte final award against the said D.B.Shipping LLC inter alia holding that the said company was liable to pay to the respondents a sum of USD 870,059.24. The said D.B.Shipping LLC neither challenged the said declaratory arbitration award dated 13th October, 2009 nor the final ex parte award dated 26th May, 2011. 10. On 3rd March, 2010, the arbitral tribunal in this proceedings after considering and recording the submissions of both parties passed declaratory arbitration award holding that (a) the guarantee issued by the petitioners on 19th September, 2008 was valid and that they guaranteed the performance of the charterers, namely D.B.Shipping LLC in respect of the charter party dated 13th September, 2008, (b) the guarantee provided for arbitration in accordance with English law as set out in clause 19(a) of the charter party, (c) tribunal had been properly constituted and (d) the tribunal had jurisdiction to determine any disputes that arose between the parties under the guarantee dated 19th September, 2008. The aforesaid view was taken in the majority award. The arbitrator nominated by the petitioners gave dissenting reasons. 11. On 15th September, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the petitioners invited my attention to some of the correspondence entered into between the parties, the deed of guarantee and also the order passed by this Court in Arbitration Petition No.524 of 2011. 16. On 12th September, 2008, the petitioners informed the broker of the respondents that the petitioners were acting only as brokers for and on behalf of the said D.B.Shipping LLC, Dubai. It is submitted by the learned counsel that the petitioners were not a party to the said charter party agreement dated 13th September, 2008 entered between the petitioners and the respondents. 17. On 18th September, 2008 the brokers of the respondent sent an e-mail to the petitioners. The relevant portion of the said e-mail is extracted as under :- for good order sake, owners kindly ask to get from POL India projects on their letterhead a confirmation of due performance. Pls confirm 18. In response to the said e-mail dated 18th September, 2008, the petitioners issued a letter dated 19th September, 2008 to the respondents. The said letter has been treated as deed of guarantee on the part of the petitioners in favour of the respondents. Relevant portion of the said lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated in the deed of guarantee, the said letter/deed of guarantee was signed only by the petitioners and not by the respondents. Under the Arbitration and Conciliation Act, 1996, the arbitration agreement is required to be signed by both parties to the agreement. Learned counsel placed reliance on the definition of the 'party' as contained in section 2(h) of the said Arbitration Act which provides that the party means a party to an arbitration agreement. 21. Learned counsel submits that by the said purported letter of guarantee the petitioners had only assured that the charterers would perform charter party but it did not state that the petitioners would perform charter party in place of the said D.B.Shipping LLC or had guaranteed the discharge of debts due by the said D.B.Shipping LLC to the respondents herein. He states that the said letter addressed by the petitioners would be even not considered as guarantee in law. 22. Learned counsel submits that since there was no arbitration agreement entered into between the parties at all, the entire arbitration proceedings which has culminated into an award is nullity and void and initio. The provisions of Part I of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part-I of the Arbitration Act was applicable to the parties. Learned counsel invited my attention to the relevant part of the affidavit in reply filed to oppose the said petition filed under section 9 by the respondents in support of this contention. 25. Learned counsel invited my attention to the averments made by the respondents in the said arbitration petition filed under section 9 of the Arbitration Act in which it was averred by the respondents that the guarantee was issued by the petitioners at Mumbai, the charter party agreement was signed at Mumbai, this Court therefore, had jurisdiction to entertain the said petition. He submits that in view of the averments made by the respondents in the petition filed under section 9 of the Arbitration Act, the respondents cannot be allowed now to urge that Part-I of the Arbitration Act is not applicable to the parties and this petition filed under section 34 of the Arbitration Conciliation Act, 1996 by the petitioners in this court is not maintainable. 26. On the issue as to whether the arbitration agreement existed between the parties or not and whether the doctrine of incorporation would apply to the facts of this case or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submits that since the alleged agreement was totally vague and the appointing authority could not be identified, such clause could not have been acted upon by either party. Learned counsel submits that the arbitral tribunal in this case has followed the ruling rendered by the arbitral tribunal in the arbitration proceedings filed by the respondents against D.B. Shipping LLC. 28. Learned counsel placed reliance on the judgment of this court in the case of Oil and Natural Gas Corporation Ltd. vs. Oil Field Instrumentation, 2004(6) Bom.C.R.100 and in particular paragraphs 2, 6, 8, 10, 12 to 14 and it is submitted that a party can always challenge the composition of the arbitral tribunal which was constituted contrary to the terms of the agreement between the parties. He submits that even if the petitioners had appointed their nominee arbitrator, that would not amount to waiver. 29. Learned counsel placed reliance on the judgment of the Supreme Court in the case of Dharma Prathishthanam vs. Madhok Construction (P) Ltd., (2005) 9 SCC 686 and it is submitted that the arbitrator appointed by the respondents itself was illegal since the alleged arbitration had referred to the Londo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Conciliation Act, 1996. 33. Learned counsel submits that under sections 5 and 6 of the English Arbitration Act, it is clearly contemplated that the arbitration agreement has to be in writing. In the declaratory arbitration award rendered by the arbitral tribunal, the arbitral tribunal has however, held that the oral arbitration agreement is valid which is contrary to sections 5 and 6 of the English Arbitration Act. 34. In support of the submission that under section 7 of the Arbitration Conciliation Act, 1996, the arbitral tribunal is not only required to be in writing but is also required to be signed by both the parties. Learned counsel placed reliance on the judgment of this Court in the case of Pramod Chimanbai Patel vs. Lalit Constructions and another, 2002(3) Mh.L.J.846 and in particular paragraphs 5 to 7. 35. Learned counsel submits that the arbitral tribunal has rendered a finding that the arbitration agreement existed between the parties merely on the basis of two letters exchanged between the parties i.e. one from the respondents asking the petitioners for guaranteeing performance of the said D.B. Shipping LLC and another letter addressed by the petitioners ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Supreme Court in the case of Shin-Etsu Chemical Co. Ltd. vs. M/s.Aksh Optifibre Ltd. Another, AIR 2005 SC 3766 and in particular paragraphs 14 to 20, 37, 56, 85, 93, 112 and 113. 40. Learned counsel submits that even under section 48 of the Arbitration Conciliation Act, 1996, there is no waiver against the statutes. Even if the declaratory arbitration award is not challenged by the petitioners, the petitioners are entitled to raise an objection that the said declaratory arbitration award is nullity and without jurisdiction under section 48 of the Arbitration Conciliation Act, 1996 while opposing the enforcement of the foreign award. Learned counsel submits that even if the petitioners have not challenged the final award under the English Law, the petitioners are still entitled to oppose the enforcement of the such foreign award under section 48 of the Arbitration Conciliation Act, 1996. There is no question of any res-judicata applicable to these proceedings. He submits that the petitioners could wait till the final award came to be delivered by the arbitral tribunal which has now been impugned in these proceedings. 41. Learned counsel for the petitioners sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tribunal. Learned counsel invited my attention to the majority as well as minority award rendered by the arbitral tribunal and would submit that since the letter of guarantee itself was contrary to and prohibited under the provisions of the said FEMA Regulations, the impugned award is in conflict with the public policy and thus such award can be opposed under section 48(2)(ii)(b) of the Arbitration Conciliation Act, 1996. Learned counsel submits that section 48((i)(a) of the Arbitration Act has to be read with section 44 of the Arbitration Conciliation Act, 1996. Since the arbitration agreement was not in writing and in any event not incorporated in the letter of guarantee and was even otherwise not in accordance with sections 5 and 6 of the English Arbitration Act, the entire proceedings were nullity and without jurisdiction. 43. In support of the plea that the letter of guarantee was contrary to law and was prohibited, the entire proceedings were without jurisdiction, reliance is placed on the judgment of the Supreme Court in the case of Mannalal Khetan Others vs. Kedar Nath Khetan Others(1977) 2 SCC 424, and in particular paragraphs 19 to 21. Learned counsel also plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a foreign award. The arbitration proceedings were held in London in accordance with English Arbitration Act and in accordance with the arbitration agreement entered into between the parties. This petition filed under section 34 of the Arbitration and Conciliation Act, 1996 is not maintainable. Part I of the Arbitration and Conciliation Act, 1996 does not apply to the foreign award. He submits that Clause 19(a) of the voyage charter party which recorded an arbitration agreement alongwith amendment thereto between the respondents and D.B.Shipping LLC stood incorporated in the letter of guarantee issued by the petitioners. According to the said arbitration clause, the parties were thus governed by and constituted in accordance with English law and any dispute arising out of the said letter of guarantee was required to be referred to arbitration in accordance with Arbitration Act 1950 and 1996 or any statutory modification or enactment thereof. Learned counsel submits that the arbitration petition filed in this court under section 34 of the Act is thus not maintainable. 48. It is submitted by the learned counsel that the parties had agreed to be bound by the standard form of agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenge the declaratory arbitration award holding that the arbitration agreement exist and the composition of the arbitral tribunal was properly constituted, the petitioners cannot be permitted to challenge the issue of existence of arbitration agreement or of alleged improper constitution of the arbitral tribunal at this stage in this proceedings under section 34 of the Arbitration and Conciliation Act, 1996 and also cannot oppose the enforcement of the final award on those grounds. The petitioners not having challenged the declaratory arbitration award within 28 days of the date of such award and also not having challenged the final award within the time prescribed before the appropriate court in London, the petitioners cannot be allowed to challenge the final award in this proceedings under section 34. Both the awards rendered by the arbitral tribunal have achieved finality and are binding on both the parties. 51. Learned counsel submits that even those awards could have been challenged only on the grounds setout in section 70 of the English Arbitration Act and not outside the purview of the said provisions. Learned counsel placed reliance on section 72 of the English Arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in particular paragraphs 76 to 80 and submits that since the petitioners have not challenged the declaratory arbitration award rendered by the arbitral tribunal, the said award has become final and conclusive on the issue of jurisdiction and on existence of arbitration agreement between the parties and thus the petitioners are barred by principles of estoppel in re-agitating the same issue in these proceedings. 55. Mr. Andhyarujina learned counsel also placed reliance on the judgment of Division Bench of this court in case of Sakuma Exports Limited (supra) (2013) 6 Bom.C.R.218 and in particular paragraphs 9 to 20 and would submit that this court has no jurisdiction to entertain, try and dispose of this petition under section 34 of the Arbitration and Conciliation Act, 1996. 56. Learned counsel submits that the findings of governing law applicable to the parties rendered by the arbitral tribunal by declaring declaratory arbitration award has become final and binding. No such issue can be agitated once again in the present petition. Principles of res judicata applies to the parties. Reliance is strongly placed on the judgment of this court in case of Perma Container (UK) Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency Pvt. Ltd. (India) vs. Mitsui OSK Lines Limited (Japan) Appeal No.416 of 2014 in appeal dismissing the appeal arising out of the order and judgment delivered in Arbitration Petition No.842 of 2009 and also placed reliance on the order passed by the Supreme Court dismissing the petition arising out of the said two judgments and order delivered by this court. 59. Learned counsel placed reliance on the judgment of Supreme Court in case of Reliance Industries Limited and another vs. Union of India (2014) 7 SCC 603 and in particular paragraphs 6, 71, 74 and 75 and would submit that petition under section 34 would not be maintainable. 60. On the issue whether the arbitration agreement forming part of the charter party agreement stood incorporated in the letter of guarantee or not, it is submitted that the entire contract between respondent and the said D.B.Shipping LLC was lifted and incorporated in the letter of guarantee including the arbitration agreement. Learned counsel distinguished the judgment of Supreme Court in case of M.R.Engineers and Contractors Private Limited (supra) (2009) 7 SCC 696 relied upon by the petitioners. He submits that the petitioners was fully aware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part as manager in negotiating terms between the respondents and D.B.Shipping LLC. The petitioners had negotiated the said contract on behalf of the said D.B.Shipping LLC. Even the charter party agreement referred to the guarantee. Learned arbitral tribunal had considered all these aspects in the declaratory arbitration award and had rendered a finding which has achieved finality. 64. Learned counsel for the respondents invited my attention to clause 19(a) of the charter party which was varied by clause 52. He submits that the parties were to provide information in Box 25. Under part 19(a) it was clearly agreed that the English Arbitration Act would apply. The proper law thus agreed between the parties was English law. The seat of the arbitration was agreed to be in London. Clause 52 of the amendment provided for GA/arbitration in London as per London Arbitration Council . It is submitted that since there was no London agreement Council, the provisions of the English Arbitration Act would apply for appointment of arbitrator and for all other purposes. The respondents had accordingly nominated their arbitrator. The petitioners had also nominated their arbitrator. The chairman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such illegal contract cannot be enforced in India is concerned, learned counsel for the respondents would submit that the permission of Reserve Bank of India was not required for execution of such letter of guarantee. In any event since the petitioners did not take the permission of the Reserve Bank they were solely responsible. He submits that the transaction was not void as such. The intent of FEMA was not to void the transaction. Atmost the penalty can be levied under the provisions of the said Act in case of any violation of the nature alleged by the petitioners. The petitioners had raised this objection before the arbitral tribunal. The arbitral tribunal in the declaratory arbitration award has rendered a finding that the local law has no relevance to the enforcement of the guarantee in the arbitral proceedings. 68. Learned counsel submits that the issue of FEMA has been dealt with by the Supreme Court in case of Renusagar Power Co. Ltd. vs. General Electric Company Anr. (supra) AIR 1985 SC 1156(1)and also in case of Shri Lal Mahal Limited (supra) (2014) 2 SCC 433. Learned counsel submits that even if any such permission was required before entering into such letter of gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age. The letter of guarantee has to be read with e-mail dated 18th September, 2008. The arbitration agreement is a separate agreement and unless specifically incorporated, it does not come into existence. He submits that unless the arbitration agreement existed, second part of clause 19 of the charter party agreement would not apply at all. 72. Learned counsel submits that since clause 19(a) was a printed term of the charter party and the clause 52 which was provided as and by way of rider to clause 19(a) was typed, in case of any inconsistency between the printed term and a typed term, a typed term has to be followed. In support of this submission, learned counsel placed reliance on the judgment of Queen's Bench Division in case of Bravo Maritime (Chartering) Est. vs. Alsayed Abdullah Mohamed Baroom (1980) 2 LLR 481 at page 487. Learned counsel also placed reliance on the judgment of Queen's Bench Division in case of Navrom vs. Callitsis Ship Management S.A. (1987) 2 LLR 276 at pages 277 to 279 and on the judgment of the Supreme Court in case of M.K.Abraham and Company vs. State of Kerala and another (1987) 2 LLR 276 at pages 277 to 279 and in particular paragraph (21) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners submits that since the petitioners were not parties to the arbitration agreement, the petitioners could not be dragged into the arbitration. 76. On the issue that the petitioners had alleged to have participated in the formation of the contract between the respondents and the said D.B.Shipping LLC, learned counsel for the petitioners submits that all the correspondence prior to the execution of the charter party agreement between the respondents and the D.B.Shipping LLC did not form the part of the charter party and no reliance thereon could be thus placed by the respondents. 77. Learned counsel placed reliance on the judgment of Queen's Bench in case of Siboti K/S (supra) (2003) 2 LLR 364 and in particular paragraph (24) and would submit that mere notice of term of the charter party in the agreement is not sufficient for the purpose of existence of an arbitration agreement. Incorporation of the arbitration agreement specifically is must. REASONS AND CONCLUSIONS Whether Arbitration Petition No.76 of 2012 filed under section 34 of the Arbitration and Conciliation Act, 1996 challenging the impugned foreign award is maintainable ? 78. It is not in dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the charterers. Its arbitration clause was restricted to its parties/signatories. 82. It was contended that the brokers even if found to be a guarantors could not be bound by the terms of arbitration clause. The petitioners would continue to mention their objections and protest to the validity of those proceedings. The petitioners called upon the arbitral tribunal to decide the preliminary issue as to whether tribunal had jurisdiction over the dispute raised by the respondents and also to decide as to whether they had jurisdiction against the petitioners who were acting as brokers. The petitioners also called upon the tribunal to decide whether they had been properly constituted and whether all the parties were given adequate opportunities to appoint their arbitrator on the panel. The petitioners enquired whether the tribunal members were of any London Arbitration Council. The petitioners called upon the tribunal to determine as to which law would apply for determining the preliminary issue raised by the petitioners. The petitioners made it clear that the petitioners were not seeking to invoke any power of adjudication of the said arbitral tribunal. In the said reply, the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitral tribunal also held that in case the petitioners on their own evidence were both the brokers involved in the negotiation and the charterers' effective managers for the charter in question and were therefore fully aware of the terms negotiated/agreed, including the fact that the charter party provided for arbitration in London in accordance with English law. 86. It is held that the petitioners had offered to provide their guarantee during the negotiations as evidenced by the fixture recap. It was therefore clear from the evidence that they offered to provide the guarantee and they knew that the charter party provided for arbitration in accordance with English law. It is held that since the petitioners as guarantors were aware of the terms agreed under the charter party and issued the guarantee with a specific reference to the terms of that document, that they intended those terms to have contractual effect to the guarantee. It is held that in the absence of any reference to the applicable law and method of dispute resolution in the guarantee, it was sufficient to show that the petitioners had intended to include the provision in the charter party for arbitration in Lond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Act, 1996 which defines a foreign award. It was contended that since the letter of guarantee was not signed by the respondents, it would not amount to arbitration agreement. The petitioners also placed reliance on the provisions of Foreign Exchange Management (Guarantees) Regulations, 2000. 89. The said arbitration petition appeared before this court on 8th November, 2011. This court recorded a statement of the learned counsel for the respondents that the parties were governed by the English law in all respect and were governed by the substantive law of England and thus the arbitration proceedings were also governed by the English law. This court placed reliance on the judgment of the Supreme Court in case of Videocon Industries Ltd. (supra) AIR 2011 SC 2040 and in view of the said judgment of the Supreme Court dismissed the said arbitration petition. It is not the case of the petitioners that the respondents herein had made a wrong statement before this court to the effect that the parties were governed by English law in all respect and were governed by substantive law of England and the arbitration proceedings were governed by English Law. It is also not the case of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the court for challenging any award of the arbitral tribunal as to its substantive jurisdiction or for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. On such application challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may either confirm the award or vary the award or set aside the award in whole or in part. The said provisions makes it clear that the party may loose a right to object in view of section 73. A right to apply was subject to the restoration of section 70(2) and (3). 93. Under section 68 of the said English Arbitration Act, a party to the arbitration proceedings may apply to the court for challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. Types of serious irregularities are provided under subsection (2) of section 68. If the tribunal exceeds its powers otherwise than by exceeding its substantive jurisdiction, Section 68 of the English Arbitration Act can be invoked amongst other grounds. A party may loose a right to object unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection. (2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling- (a) by any available arbitral process of appeal or review, or (b) by challenging the award, does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal s substantive jurisdiction on any ground which was the subject of that ruling. 97. A perusal of the aforesaid provisions of English Arbitration Act makes it clear that the petitioners who had raised an objection about existence of arbitration agreement, composition of arbitral tribunal etc. had a right and remedy of challenging such declaratory arbitration award by filing an appropriate proceedings within the time prescribed under English Arbitration Act on the ground setout therein. Even if according to the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputes arising out or in conjunction with the contract were to be referred to the Refined Sugar Association for settlement in accordance with the rules relating to arbitration of the Association. The law in the U.K. is, therefore, the substantive law of the contract. The seat of the arbitration is in the U.K. Parties have made it clear that the rules of the Refined Sugar Association would govern the resolution of their disputes. Rule 8 of the Rules of the Refined Sugar Association (on which there is no dispute between the parties during the course of the hearing of the appeal) provides as follows: 8. For the purpose of all proceedings in arbitration, the contract shall be deemed to have been made in England, any correspondence in reference to the offer, the acceptance, the place of payment or otherwise, not-withstanding, and England shall be regarded as the place of performance. Disputes shall be settled according to the law of England wherever the domicile, residence or place of business of the parties to the contract may be or become. The seat of the Arbitration shall be England and all proceedings shall take place in England. It shall not be necessary for the award to stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law of arbitration would be law of England and provisions of Part I of Arbitration and Conciliation Act, 1996 were not applicable to the arbitration agreement. 100. Division Bench of this court in case of Harkirat Singh (supra) Appeal No.171 of 2007 has held that if the jurisdictional seat of the arbitration is in London, Part I of the English English Arbitration Act, 1996 would apply. Part I of the said English Arbitration Act, 1996 and in particular sections 67 and 68 which deals with challenges to an arbitral award are mandatory provisions having effect notwithstanding any agreement to the contrary. It is held that the parties having chosen the juridical seat of arbitration at London, had subjected themselves to the English law by virtue of section 2, read with section 4 and sections 67 and 68 of the English Arbitration Act, 1996. It is held that the award in question thus could be challenged by the appellant only before the English Courts under Sections 67 and 68 of the English Arbitration Act, 1996 and not under section 34 of the Arbitration and Conciliation Act, 1996. The Division Bench held that the petition filed under section 34 of the Arbitration and Conciliation Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that it was not intended by the parties that the Indian law would apply to the main agreement as well as to the arbitration agreement. Admittedly arbitration proceedings were held at Singapore in accordance with Singapore International Arbitration Rules. Respondents have participated in the said proceedings before the Arbitral Tribunal. It is also not in dispute that the parties had agreed that the seat of arbitration shall be at Singapore. In my view, agreement to arbitrate at Singapore has a closer and real connection with the place where the parties had chosen to arbitrate. Arbitration agreement would be thus governed by the law of Singapore and not Indian law. In my view principles of law laid down by the Supreme Court in case of Sumitomo Heavy Industries Ltd. (supra) and in case of National Thermal Power Corporation (supra), shall be squarely applicable to the facts of this case. Judgment of the Supreme Court in case of Bharat Aluminium (supra), has been interpreted by the Division Bench of this court in case of Konkola Copper Mines (PLC) (supra) in which it is held by the Division Bench of this court that the entire judgment of the Supreme Court in case of Bharat Aluminium( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondents herein that the arbitral tribunal did not have jurisdiction to decide the allegations to forgery, fraud and fabrication and has rendered the jurisdictional award holding that under law of Singapore, the arbitral tribunal has jurisdiction to decide such allegations. Admittedly the respondents have not challenged the said jurisdictional award in any proceedings at Singapore under the laws of Singapore. Question that arises is whether such jurisdictional award can be relied upon in this proceedings by the petitioner in view of the respondents not having challenged the said jurisdictional award rejecting the plea of jurisdiction raised by the respondents, without filing an application for enforcement of the said award. Question also arises is that whether present petition filed under section 9 of the Arbitration and Conciliation Act, 1996 is an application for enforcement of the jurisdictional award, interim award or is simplicitor for interim measures against the respondents independently. Submission of the respondents is that if as per law of India, if final relief cannot be enforced in India in view of the subject matter of the difference being not capable of sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to decide the allegations to forgery, fraud and fabrication and has rendered the jurisdictional award holding that under law of Singapore, the arbitral tribunal has jurisdiction to decide such allegations. Admittedly the respondents have not challenged the said jurisdictional award in any proceedings at Singapore under the laws of Singapore. Question that arises is whether such jurisdictional award can be relied upon in this proceedings by the petitioner in view of the respondents not having challenged the said jurisdictional award rejecting the plea of jurisdiction raised by the respondents, without filing an application for enforcement of the said award. Question also arises is that whether present petition filed under section 9 of the Arbitration and Conciliation Act, 1996 is an application for enforcement of the jurisdictional award, interim award or is simplicitor for interim measures against the respondents independently. Submission of the respondents is that if as per law of India, if final relief cannot be enforced in India in view of the subject matter of the difference being not capable of settlement by arbitration under the law of India or if enforcement of the award wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .(supra), Bhanu Kumar Jain (supra), Ishwar Dutt (supra), Arjun Singh (supra) and this court in case of IndoPharma Pharmaceutical Works Private Limited has considered this issue at length, relevant paragraphs thereof are highlighted in earlier part of this judgment. It is held that principles of estoppel and res judicata are based on public policy and justice. Issue of arbitrability and jurisdiction having been concluded cannot be agitated by the same parties in another proceedings being barred by law of estoppel. It operates as estoppel in any subsequent proceedings if in the earlier proceedings between the parties, the issue had been determined. It is held that res judicata could be applicable to different stages of the same suits as to findings on the issues. 80. Having taken a view that law of Singapore would apply to the parties in this proceedings and under laws of Singapore, respondents would have remedy of challenge the interim awards before the appropriate court at Singapore and the respondents not having challenged the said jurisdictional award and interim award, in my view the said jurisdictional award and interim award made by the arbitral tribunal between the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated upon by arbitration. Article 17 of the said agreement is extracted as under : ARTICLE 17 : any difference of opinion or any claim or dispute arising out of this Agreement shall be settled by arbitration in Tokyo. Each party shall appoint one arbitrator with power to such arbitrators to appoint, if necessary, an umpire. Any such arbitration shall be deemed a reference to arbitration under the provisions of the 'Code of Civil Procedure of Japan 1890 regarding Arbitration Proceedings' or any statutory modification or reenactment thereof for the time being in force. 5. On 10th June 2002, petitioner invoked arbitration clause and nominated Mr Mitsuhiro Toda as arbitrator and called upon the respondent to appoint their arbitrator. Respondent did not appoint any arbitrator. Petitioner filed an application under Section 11 of the Arbitration Act before the Supreme Court. In those proceedings, it was contended by the respondent that Section 11(6), (8) and (12) of the Arbitration Act would not be applicable as the arbitration agreement provided that arbitration was to be conducted in Tokyo (Japan) and was governed by law of arbitration applicable in Japan, particularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons who are under disability, deaf, dumb, or deprived of or suspended from the enjoyment of public rights may, if nominated to be arbitrators, be challenged. Section 797. If the parties contend that the arbitration procedure entered upon is not one which is to be allowed, or in particular, that no legally binding agreement of arbitration has been made, or that the arbitration agreement does not relate to the controversy to be settled, or that the arbitrators have no power to exercise their office, nevertheless the arbitrators may proceed with their function and make an award. Section 800. As between the parties the award shall have the same effect as a final and conclusive judgement of a Court of Justice. Section 801. (1) Application to set aside an award may be made in any of the following cases: 1. Where the arbitration was one which ought not to have been allowed; 2. Where the award orders a party to do an act which is prohibited by law; 3. Where in the arbitration procedure the parties were not lawfully represented; 4. Where the parties were not heard in the arbitration procedure; 5. Where the award does not show the ground on which the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward has been made by the respondent within the period of three months from the date of receipt of the award by the respondent on 4th May 2009 and thus the said award has become final in Japan is not open to opposition or appeal in Japan. It is stated that the said award is not contrary to public policy or the law of India. Petitioner has also annexed copy of the arbitration law of Japan and also the extract of the arbitration procedure. 34. On perusal of the order passed by Tokyo District Court dated 9th February, 2005 in the petition filed by the petitioner for appointment of arbitrator against the respondents pursuant to the order passed by the Supreme Court of India, it is clear that the respondents had opposed the appointment of arbitrator on various grounds including the ground that the agency agreement including arbitration agreement became void. It was also pleaded by the respondents that there was change of method of transportation in the year 1981 and since then the respondents were supposed to do agency business of transportation by containers pursuant to oral agreement or exchange of letters between the parties. The respondents had pleaded oral agreement for such all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that the order passed by the Tokyo District Court rejecting the contentions including stay of arbitration in view of the pendency of civil suit in this court, that arbitration agreement had become void in view of change of terms and conditions etc. are final and binding on the parties. Appeal filed by the respondents before the High Court of Tokyo and Supreme Court of Japan impugning the order passed by the Tokyo District Court are rejected. In my view, respondents thus cannot be allowed to agitate those issues in this proceedings. 42. In so far as judgment of this court in case of Jindal Drugs Limited (supra) relied upon by Mr.Kamat, learned counsel for the respondents is concerned, it is held by this court that a comparison of provision of section 48 and section 34 of the Arbitration and Conciliation Act shows that the grounds on which a domestic award can be challenged as also the grounds on which a party can resist enforcement of a foreign award are identical. It is held that when enforcement of award is sought against the petitioner,it can resist the enforcement of the award on the same grounds on which it could have challenged the award under section 34 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d v. General Electric Co. MANU/SC/0195/1994 : 1994 Supp (1) SCC 644. For all this there is no reason why Renusagar Power Co. Limited v. General Electric Co. MANU/SC/0195/1994 : 1994 Supp (1) SCC 644 should not apply as regards the scope of inquiry Under Section 48(2)(b). Following Renusagar Power Co. Limited v. General Electric Co. MANU/SC/0195/1994: 1994 Supp (1) SCC 644, we think that for the purposes of Section 48(2)(b), the expression public policy of India must be given narrow meaning and the enforcement of foreign award would be refused on the ground that it is contrary to public policy of India if it is covered by one of the three categories enumerated in Renusagar Power Co. Limited v. General Electric Co. MANU/SC/0195/1994 : 1994 Supp (1) SCC 644. 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 'public policy of India' doctrine for the purposes of Section 48(2)(b) is more limited than the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orcement of award would be contrary to the public policy of India. Supreme court of India in case of Shri Lal Mahal Ltd. (supra) has laid down the principles that only if enforcement would be contrary to fundamental policy of Indian law, the interest of India or justice or morality, enforcement of such award can be refused under section 48 (2) (b). I am respectfully bound by the judgment of the Supreme Court. In view of the judgment of the Supreme Court in case of Shri Lal Mahal Ltd.(supra), reliance placed by Mr.Kamat, learned counsel appearing for respondents on the judgment of this court in case of Jindal Drugs Limited (supra) would be totally misplaced being contrary to the principles laid down by this court are overruled by the Supreme Court on that issue. 105. The appeal as well as Special Leave Petition arising out of the said judgment dated 28th January, 2014 in case of Mitsui OSK Lines Ltd.(Japan) (supra) Arbitration Petition No.842 of 2009 are dismissed. 106. In my view, the award rendered by the arbitral tribunal was a foreign award rendered in international commercial arbitration. The parties were governed by the laws of England. The jurisdictional seat of arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order did not accept the submission of the petitioners that Part I was applicable to the parties. 109. On the contrary this court accepted the submission of the respondents that the parties were governed by laws of England and the provisions of English Arbitration Act was applicable. The petitioners did not oppose the statement made by the respondents that Part I was not applicable or that the English law was applicable to the parties or that the reliance placed by the respondents on the judgment of Videocon Industries Ltd. (supra) was misplaced. This court dismissed the said arbitration petition filed under section 9 by applying the principles laid down by the Supreme Court in case of Videocon Industries Ltd. (supra). The petitioners having accepted the said order passed by this court, in my view cannot be allowed to now urge that since the respondents had filed the said petition filed under section 9 in this court, consequently arbitration petition filed by the petitioners under section 34 of the Arbitration and Conciliation Act for impugning the foreign award also would be maintainable in this court and that Part I of the Arbitration and Conciliation Act, 1996 would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions of the charter party applicable to the respondents and the said D.B.Shipping LLC. A perusal of the record indicates that the said rider to the charter party agreement was signed by the petitioners themselves on behalf of the said D.B.Shipping LLC. Even in the said rider to the original charter party agreement, there was a reference to the guarantee. There was also a reference to the guarantee in the correspondence exchanged between the parties. A perusal of the letter of guarantee signed by the petitioners also indicates that there was a reference to the entire Gencon which admittedly included arbitration agreement. The entire terms and conditions of the charter party agreement which incorporated the Gencon stood incorporated in the letter of guarantee including the arbitration agreement. 113. Supreme Court in case of Alimenta S.A. (supra) (1987) 1 SCC 615 has noticed that there has been a long continued practice in England that the arbitration clause is not incorporated into the bill of lading by general words unless it is explicitly done in clear words either in the bill of lading or in the charter party. Supreme Court held that the parties were aware of the arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the contract. Paragraph 7 of the judgment of the Supreme Court in case of Groupe Chimique Tunisien SA (supra) which squarely applies to the facts of this case read thus :- 7. The purchase orders placed by the respondent with the petitioner are the contracts between the parties and they are subject to FAI Terms which contain the arbitration clause. Sub-section (5) of Section 7 specifically provides that where there is reference in a contract (in this case, the purchase order) to a document containing an arbitration clause (in this case, FAI Terms), such reference constitutes an arbitration agreement, if the contract is in writing and the reference is such as to make that arbitration clause a part of the contract. The case squarely falls under Section 7(5) of the Act and there is an arbitration agreement between the parties as per clause 15 of FAI Terms. 117. Learned Single Judge of this court in case of United Shippers Limited (supra) Arbitration Application No.50 of 2007 has considered a similar situation and has held that the provisions of the MOU did not restrict the incorporation of only a part of the second contract. It incorporated the whole. The learned Single J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final and binding between the parties, no such objection can be allowed under section 48 of the Arbitration and Conciliation Act. 121. In so far as submission of the learned counsel that a party can challenge a composition of arbitral tribunal any time and even under the provisions of section 34 or at the stage of section 48 is concerned, in my view since the petitioners have not challenged the findings and conclusion of the arbitral tribunal rejecting such plea in the declaratory arbitration award under the provisions of English Arbitration Act, the petitioners have lost their right to challenge those findings. Petitioners cannot be allowed to challenge those findings under section 34 or under section 48. 122. In so far as judgment of this court in case of Oil and Natural Gas Corporation Ltd. (supra) 2004(6) Bom.C.R.100 is concerned, this court has considered section 16 of the Arbitration and Conciliation Act, 1996 and has held that even if the party has participated in the appointment of the arbitral tribunal, he can raise an objection about the constitution of arbitral tribunal under section 16(2) of the Act. The said judgment of this court does not apply to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, a perusal of the record indicates that both the parties had nominated their arbitrator. There is thus no merit in this submission of the learned counsel for the petitioners that the arbitrator was appointed unilaterally. Under the provisions of the English Arbitration Act, the parties are permitted to nominate their own arbitrator for the purpose of constitution of the tribunal. 126. In so far as submission of the learned counsel for the petitioners that the petitioners were not a party to the arbitration agreement and thus award is illegal is concerned, in my view there is no merit in the submission of the learned counsel. The arbitration agreement stood incorporated in the letter of guarantee and thus the petitioners were party to the arbitration agreement. Reliance placed on the judgment of the Supreme Court in case of Sukalu Ram Gond (supra) (1994) 5 SCC 570 is totally misplaced. 127. In so far as submission of the learned counsel for the petitioners that even under section 44 of the Arbitration and Conciliation Act, 1996 arbitration agreement has to be in writing and since there was no arbitration agreement in writing, even the court could not have referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s Bench Division in case of Navrom (supra) (1987) 2 LLR 276 at pages 277 to 279 is misplaced. 130. The next submission of the learned counsel for the petitioners is that since in the rider to the charter party agreement, the clause provided that the arbitration in London as per London Arbitration Council and admittedly there being no London Arbitration Council in existence, such clause could not be construed as an arbitration agreement. It is also the submission of the petitioners that since there was no London Council of Arbitration, arbitrators could not have been appointed by the parties but could be only appointed by the appropriate court in London. The arbitration clause in the charter party agreement was not substituted or deleted by the rider. Only the additional information is provided by the said rider. The petitioners had raised this issue before the arbitral tribunal and the same has been negatived in the declaratory arbitration award which award has become final and binding. No such issue thus can be raised by the petitioners at this stage under section 34 or under section 48. Be that as it may, even if there was no London Arbitration Council, the other part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed the chairman of the arbitral tribunal in accordance with the arbitration agreement and as per provisions of the English Arbitration Act. The said judgment of the Supreme Court in case of Dharma Prathishthanam (supra) thus does not assist the petitioners. 134. In so far as judgment of Supreme Court in case of S.N.Prasad(supra) AIR (2011) SC 442 is concerned, the guarantor in that matter was not a party to the arbitration agreement and had only indicated his willingness to stood guarantee but he did not execute the loan agreement or any deed of guarantee. The Supreme Court in that situation held that the second guarantor was not a party to the loan agreement containing arbitration clause between the lender and borrower and could not be subjected to the arbitration award. However, in this case the petitioners have not only executed the letter of guarantee but the charter party agreement between the respondents and the said D.B.Shipping LLC stood incorporated including arbitration agreement in the letter of guarantee. Judgment of Supreme Court in case of S.N.Prasad (supra) thus does not assist the petitioners. 135. In so far as judgment relied upon by the petitioners in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edy of challenge to interim, jurisdictional and final award and the effect of not challenging such awards. 137. The next submission of Mr.Makhija, learned counsel for the petitioners is that since the respondents have not obtained any leave under section 66 of the Arbitration Act, 1996 (English Arbitration) before seeking enforcement of the foreign award in this court, the said foreign award cannot be enforced by this court. In support of this submission, learned counsel placed reliance on the judgment in case of African Fertilizers and Chemicals NIG Ltd. (Nigeria) (supra) (2011) 2 Lloyd's Law Reports, 531, judgment in case of West Tankers INC vs.Allianz Spa and another (supra) (2011) 2 Lloyd's Law Reports 117 and judgment in case of West Tankers INC vs.Allianz Spa and another (The Front Comor ) (2012) 1 LLR 398 . 138. A perusal of section 66(4) read with sections 100 and 104 of the English Arbitration Act, clearly indicates that the provisions prior to section 104 would not affect any right to rely upon or enforce at New York Convention Law or common law under section 66. In my view if the respondents would have applied for enforcement of the declaratory arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Khetan and others (supra) (1977) 2 SCC 424 and in particular paragraphs 19 to 20 which read thus :- 19. Where a contract, express or implied, is expressly or by implication forbidden by statute, no court will lend its assistance to give it effect. (See Mellis v. Shirley L.B.) A contract is void if prohibited by a statute under a penalty, even without express declaration that the contract is void, because such a penalty implies a prohibition. The penalty may be imposed with intent merely to deter persons from entering into the contract or for the purposes of revenue or that the contract shall not be entered into so as to be valid at law. A distinction is sometimes made between contracts entered into with the object of committing an illegal act and contracts expressly or impliedly prohibited by statute. The distinction is that in the former class one has only to look and see what acts the statute prohibits; it does not matter whether or not it prohibits a contract: if a contract is made to do a prohibited act, that contract will be unenforceable. In the latter class, one has to consider not what act the statute prohibits, but what contracts it prohibits. One is not concerned at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below the rank of an Assistant Director of Enforcement specially empowered in this behalf by order of the Central Government (in either case hereinafter referred to as the adjudicating officer). Rules have also been framed under FERA for getting permission. As per directions of the Reserve Bank of India, under Sec.23-A.1, permission must be obtained anterior to any transaction contemplated under Sec.31 of FERA. There are also prescribed Forms as to how to make the applications and what is to be done about the sale proceeds. Unless and until the said form is filled up, and permission is granted, no sale of a property by a foreigner can be recognised. Even if as between two contracting parties the title may pass, while exercising the discretion under Sec. 20 of the Specific Relief Act, court will have to consider whether it should be a party to a transaction for which permission is not obtained from the Reserve Bank of India. 36. If a specific performance decree is passed that will amount to allowing the parties to bypass the provisions of FERA. The question whether permission has to be granted or not is matter which has to be decided only by the Reserve Bank of India, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it will be against the provisions of Sec. 23 of the Indian Contract Act. The court will be reluctant to exercise a discretion in favour of the plaintiff in such a case. 142. Per contra, the submission of the learned counsel for the respondents is that no prior permission of the Reserve Bank is required for executing a letter of guarantee as canvassed by the petitioners under regulation (3) of the Foreign Exchange Management (Guarantees) Regulations, 2000. In any event since such permission is not obtained before execution of letter of guarantee by the petitioners the petitioners themselves are responsible for the same. Learned counsel submits that in any event such permission can be obtained post facto. Learned counsel placed reliance on section 13 of the Foreign Exchange Management Act, 1999 which provides for payment of penalty in case of contravention of any of the provisions of the Act and submits that since there is provision of payment of penalty, the transaction entered into without permission of the authority even if required does not become void. Section 13 of the Foreign Exchange Management Act, 1999 read thus :- 13. Penalties.-(1) If any person contravenes any prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the predecessor legislation to FEMA namely FERA 1973 vide Section 47 prohibited entering into any contract or agreement directly or indirectly evading or avoiding any operation of the said Act or any provision thereof. However Sub Section (3) thereof also provided that such prohibition shall not prevent legal proceedings being brought in India for recovery of a sum which apart from the provision of FERA would be due. However the legislature while re-enacting the law on the subject has chosen to do away with such a provision. We are of the view that the same shows a legislative intent to not void the transaction even if in violation of the said Act. Thus we are of the opinion that the plea of the appellant Company in this regard is without any force. 12. The pleadings of the appellant Company are conspicuously silent as to why Mr. Ravi Chilukuri who has a substantial stake in the appellant Company and who from the documents filed by the respondent is the face/promoter of the appellant Company and/or of the Group of Companies to which the appellant Company belongs signed the Guarantee Declaration, Promissory Notes and as to how the Resolution aforesaid of the Board of Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the Petitioner, under section 9 of FERA no permission is required for entering into a contract. Permission is required only for making payment. Thus, a contract which has the provisions for making payment, if entered into without obtaining permission under Section 9 would be valid, only before making payment under that contract permission will be required to be obtained. It is further submitted that the permission that is contemplated by Section 9 of FERA is not a prior permission. Therefore, even ex-post-facto permission can also be obtained. In any event, it is submitted that because the award is made in an arbitration which was under ECAAP, which has not received the permission of RBI, the award cannot be faulted. At the most, at the time of execution if the petitioner has not obtained permission of RBI by then the respondent may be able to resist payment without the petitioner obtaining the permission of the Reserve Bank of India. In my opinion, the objection raised on behalf of the respondent is entirely covered by the judgment of the Supreme Court in the case of Renusagar, against the respondent. The observations of the Supreme Court from paragraphs 81 to 83 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section (3) allows legal proceedings to be brought to recover sum due as a debt, damages or otherwise, but no steps shall be taken to enforce the judgment, etc. except to the extent permitted by the Reserve Bank. The effect of these provisions is to prevent the very thing which is claimed here, namely, that the Foreign Exchange Regulation Act arms persons against performance of their contracts by setting up the shield of illegality. An implied term is engrafted upon the contract of parties by the second part of sub-section (2) and by sub-section (3) the responsibility of obtaining the permission of the Reserve Bank before enforcing judgment, decree or order of Court, is transferred to the decree-holder. The section is perfectly plain, though perhaps it might have been worded better for which a 'model existed in England (p.1031) (of SCR): (at p.1290 of A.I.R.). 83. To the same effect is the law laid down by the House of Lords in England in (Contract and Trading Co.Ltd. v. Barbey), 1960 A.C. 244 wherein the following observations from the judgment of Somerwell LJ. in (Cummings v. London Bullion Company Ltd.), 1952 (1) K.B. 327, have been quoted with approval: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which part amount was written off. A Show Cause Notice was issued. An adjudication order was passed by the Dy. Director, Enforcement Directorate. It was contended by the Indian company that it applied for permission of the RBI to give up its claim against the Malaysian firm later. It was held that in the absence of the word previous before the word permission , ex post facto permission could have been granted by the RBI. Relying upon the case of LIC of India Vs. Escorts Ltd. (1986) 1 SCC 264 Section 29 (1) of FERA came to be interpreted. It was held that a permission under FERA may be sought at any time, even subsequent to the acts sought to be restricted. It was held that the commission of the acts envisaged under Section 16 do not contemplate offences under those sub clauses. The offence would be completed, if the acts were done without the permission of the RBI and unless there was a positive decision on the part of the RBI to grant or refuse the permission the offence was not complete. Consequently the offence under Section 8 of FEMA r/w the notification dated 3rd May, 2000 of the RBI would go the same way. 43. Mr. Chinoy has relied upon the judgment in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the concept of public policy must be construed as applied in the field of private international law and consequently to be against public policy it should be contrary to: (i) fundamental policy of Indian law ; or (ii) the interests of India; or (iii) justice or morality. 146. Learned counsel appearing for the respondents submits that the scope of objection under section 48 of the Arbitration and Conciliation Act, 1996 is extremely limited. None of the grounds setout in section 48 are satisfied by the petitioners in this case. Learned counsel submits that enforcement of a foreign award can be refused only if it is contrary to the fundamental policy of Indian law, interests of India or justice or morality and not on any other ground. Reliance is placed on the judgment of Supreme Court in case of Shri Lal Mahal Limited (supra) (2014) 2 SCC 433 and in particular paragraphs 22, 23 to 28, 45 to 47 which read thus :- 22. It is not necessary to narrate in detail the facts in Renusagar. Suffice it to say that Arbitral Tribunal, GAFTA in Paris passed an award in favour of General Electric Company (GEC) against Renusagar. GEC sought to enforce the award passed in its f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Renusagar, this Court in paras65 and 66 of the Report stated: (SCC pp. 681-82) 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, 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 Arbitration (Protocol and Convention) Act, 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 words and the law of India which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. 66. This would mean that public policy in Section 7(1)(b)(ii) has been used in a narrower sense and in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the award is against public policy. Award could also be set aside if it was so unfair and unreasonable that it shocks the conscience of the court. 26. From the discussion made by this Court in Saw Pipes in para 18, para 22 and para 31 of the Report, it can be safely observed that while accepting the narrow meaning given to the expression public policy in Renusagar in the matters of enforcement of foreign award, there was departure from the said meaning for the purposes of the jurisdiction of the Court in setting aside the award under Section 34. 27. In our view, what has been stated by this Court in Renusagar with reference to Section 7(1)(b)(ii) of the Foreign Awards Act must apply equally to the ambit and scope of Section 48(2)(b) of the 1996 Act. In Renusagar it has been expressly exposited that the expression 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 matter involving conflict of laws has been noticed in Renusag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard of Appeal. 47. While considering the enforceability of foreign awards, the court does not exercise appellate jurisdiction over the foreign award nor does it enquire as to whether, while rendering foreign award, some error has been committed. Under Section 48(2)(b) the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to: (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. The objections raised by the appellant do not fall in any of these categories and, therefore, the foreign awards cannot be held to be contrary to public policy of India as contemplated under Section 48(2)(b). 147. Learned counsel also placed reliance on the judgment of Delhi High Court in case of Penn Racquet Sports (supra) ILR (2011) Delhi 181 and in particular paragraph (44) which read thus :- 44. As held by the Supreme Court, the recognition and enforcement of a foreign award cannot be denied merely because the award is in contravention of the law of India. The award should be contrary to the fundamental policy of Indian law, for the Courts in India to deny recognition and enforcement of a foreign award. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y point of time. 149. Paragraphs 2, 11(c), 28 to 34 of the judgment of the Division Bench in case of Videocon Industries Limited (supra) 2014 SCC Online Bom.1276 which are relevant for the purpose of deciding this issue read thus :- 2. The petition for winding up of Videocon was instituted by the Bank, which is a bank incorporated under the Laws of Italy. It is the case of the Bank that in the month of October 2006 Videocon approached the Bank for financial assistance to the tune Euros 35 Millions for its first generation step down subsidiary viz. VDC Technologies S.P.A. (the Subsidiary). As a condition to secure the financial assistance, Videocon offered and ultimately issued a guarantee letter styled as 'Patronage Letter' on 5 June 2007 in favour of the Bank. Under loan agreement dated 6 June 2007, the Bank advanced financial assistance to the tune of Euros 35 Million to the Subsidiary, in which the terms and conditions for such advance, came to be set out. Clause 7.1 of the loan agreement, inter alia required the Subsidiary to maintain sufficient balance in its current account to repay the loan installments. There was a breach of this provision and consequent defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antee to or on behalf of the latter in connection with its business. 29. It is true that Videocon which is a person resident in India gave such a guarantee for its subsidiary with registered office in Italy which is a person resident outside India. Learned counsel for Videocon vehemently submitted that since no special permission of the Reserve Bank is on record and no general permission was granted at the time of issuance of the letter of guarantee in 2007, it may be held that the Patronage letter was null and void ab initio. 30. It is not possible to accept the above contention for several reasons. In the first place the words or with the general or special permission of Reserve Bank cannot be construed as prior permission of the Reserve Bank. Where the Regulations contemplate that prior permission or prior approval of the Reserve Bank is required to be obtained, it is so specified. For instance, Regulation 3.A imposes restriction of obtaining overseas guarantee in the following terms: 3.A No corporate registered under the Companies Act, 1956 (1 of 1956) shall avail domestic rupee denominated structured obligations by obtaining credit enhancement in the form of gua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny in connection with its business. 32. Though learned counsel for Videocon submitted that the aforesaid amendment came into force from 27 May 2011 and therefore long after issuance of the Patronage letter, it is necessary to see how Reserve Bank itself looked at such a situation in the year 2007. Question Nos. 34 and 35 and the answers given to the respective questions by the Reserve Bank in the Appendix II of the Foreign Exchange Management Manual 2007 Edition contain Frequently Asked Questions , which inter alia, read as under: Q. 34 Can an Indian Party have a JV/WOS through a Special Purpose Vehicle (SPV) under the Automatic Route? A. Yes. Direct investment through the medium of a SPV is permitted under the Automatic Route. Q. 35 Can an Indian Party directly fund such stepsubsidiaries? A. Where the JV/WOS has been established through a SPV all funding to the operating subsidiary should be routed through the SPV only. However, in the case of guarantees to be given to the step down subsidiary these can be given directly by the Indian Party provided such exposures are within the permissible financial commitment of the Indian Party. [Emphasis supplied] 33. Answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion taking up such dishonest defence. In these decisions High Courts have taken the view that in matters of commercial transactions involving crores of amount where the company facing winding up proceedings had stood a guarantor, if any such defence were to be accepted, we would be giving a wrong signal and dissuading foreign commercial entities from relying on the guarantees given by Indian Companies and which would ultimately undermine the role of India the world of trade and commerce. We could not agree less. We, therefore, do not find any merit in submissions of Dr. Tulzapurkar that the order of admission of the winding up petition was erroneous on any such count. 150. A perusal of the record clearly indicates that the petitioner had not only in execution of letter of guarantee in favour of the respondent so as to secure the performance of the said D.B.Shipping LLC but had also participated in the execution of the charter party agreement between the respondent and the said D.B.Shipping LLC. Even in the correspondence entered into with the respondent prior to the date of the execution of such charter party agreement, some of which were signed by the petitioner on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving a wrong signal and dissuading foreign commercial entities from relying on the guarantees given by Indian Companies and which would ultimately undermine the role of India, the world of trade and commerce. This court also considered the conduct of the appellant by holding that the defence now raised by the appellant that the said patronage letter was issued in contravention of provisions of FEMA or in breach of any other requirements was only after receiving statutory notice i.e. after almost four years of issuance of the patronage letter. It is held that even if the appellant therein had committed any wrong in issuing the patronage letter without obtaining permission of the Reserve Bank, as per the settled legal position, it was not open to a party to take advantage of its own wrong. In my view, the judgment of the Division Bench in case of Videocon Industries Ltd.(supra) squarely applies to the facts of this case. Division Bench has already interpreted the regulation of Foreign Exchange Management (Guarantees) Regulation, 2000 and has also considered the conduct of the appellant who had not raised any such objections for several years and has held that no such prior permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1156(1) has held that the principles laid down in the judgment of Renusagar Power Co. Ltd. (supra) must apply for the purpose of section 48(2) (b) of the Arbitration and Conciliation Act, 1996. It is held that 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, its application differs in degree insofar as these two Sections are concerned. The application of 'public policy of India' doctrine for the purposes of Section 48(2)(b) is more limited than the application of the same expression in respect of the domestic arbitral award. Supreme Court has held that section 48 of the Arbitration and Conciliation Act, 1996 does not give an opportunity to have a second look at the foreign award in the award enforcement stage. It is held that under section under Section 48(2)(b) the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to: (1) fundamental policy of Indian law; or (2) the interests of India; or (3) justice or morality. In my view the principles laid down by the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment (Guarantees) Regulation, 2000 which was acted upon by the parties simplicitor violation of the provisions of the said regulation, in my view would not be contrary to the fundamental policy of Indian law as interpreted by the Supreme Court in case of Renusagar Power Co. Ltd. (supra). 159. Delhi High court in case of SRM Exploration Pvt.Ltd. (supra) (2012) 4 Company Law Journal 178 (Delhi) has dealt with the provisions of FEMA, 1999 including section 3 and has held that there was no provision voiding the transaction in contravention thereof. Delhi High Court has also referred to Section 47 of FERA 1973 which prohibited from entering into contract agreement directing or indirectly for operation of the said Act or any provisions thereof. It is held by Delhi High Court that the legislature while reenacting the law on the subject has chosen to do away with such a provision which shows a legislative intent to not void the transaction even if in violation of the said Act. I am in respectful agreement with the view expressed by Delhi High Court in case of SRM Exploration Pvt.Ltd. (supra). Delhi High Court in the said judgment has held that the world is a shrinking place today and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of law, that will amount to enforcement of an illegal contract. The contract per se may not be illegal. But its enforcement requires compliance of statutory conditions, failure of which will amount to statutory violation. In my view this judgment of the Supreme Court does not assist the petitioner since no prior consent of the Reserve Bank or any other authority is required for issuance of the nature of the guarantee executed by the petitioner. 162. Delhi High Court in case of Penn Racquet Sports (supra) ILR (2011) Delhi 181, after adverting to the judgment of Supreme Court in case of Fuerst Day Lawson Ltd.(supra) (2001) 6 SCC 356 held that narrow meaning must be given under Section 48 in proceedings for enforcement of a foreign award and affirmed the principle that only when the nation's most basic notions of morality and justice are violated, would the public policy doctrine be applied to refuse enforcement. Delhi High Court has followed the said judgment of the Supreme Court in case of Fuerst Day Lawson Ltd. (supra) and has held that the award should be contrary to the fundamental policy of Indian law, for the courts in India to deny recognition and enforcement o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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