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RIO Glass Solar SA Versus Shriram EPC Limited and Ors.

2017 (2) TMI 1278 - MADRAS HIGH COURT

Arbitration and Conciliation - foreign award unenforceable on account of non stamping - Held that:- The contentions raised by the respondent that the foreign award is unenforceable on account of non stamping, stands rejected. - Violation of the principles of natural justice - legality of foreign award - Held that:- On a perusal of the impugned award, factually it appears otherwise and the Arbitral Tribunal considered this objection and rendered its finding from paragraph 179 onwards and ulti .....

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over the award passed by the Arbitral Tribunal. This has been frowned upon by the Courts in several decisions, some of which have been referred to above. - The contention stating that there was no opportunity to cross examine and other related matters are all touching upon the merits of the award and in this petition under Section 47 of the Act, seeking enforcement of the award, all that is required to be seen is as to whether the award is (a) contrary to the fundamental policy of India. The .....

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es is to have a judicial approach. When such judicial approach is lacking in a quasi judicial decision, the same can be interfered with. - This Court would, once again, point out that the present proceeding is not a proceeding to set aside the award under Section 34 of the Act. The respondent cannot seek to import the principles of challenge to an award under Section 34 of the Act, into these proceedings where a foreign award is sought to be implemented. - Original Petition No. 587 of 20 .....

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tioner and against the respondent along with costs in its entirety. 2. The petitioner is a company registered in Spain. The respondent is a private limited company registered under the Companies Act, 1956 with the registered office in Tamil Nadu. The petitioner is engaged in the manufacture of thermo solar parabolic mirrors and supplies mirrors to projects situated in including but not limited to Spain, USA, Algeria, Morocco, India and China. The petitioner is stated to have held negotiations du .....

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an agreement was entered into on 30.11.2011 and executed in counterparts as of 30.11.2011, 19.12.2011 and 02.1.2012 and the petitioner agreed to manufacture and sell and the Shriram agreed to purchase parabolic mirrors for a consideration of € 8,399,244.67 for the use in the construction of thermo solar power plant in India. The agreement contains an arbitration clause in Clause 17.13, which provides that all disputes shall be finally settled under the Rules of Arbitration of the Internatio .....

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were jointly and severally liable, in its Second Memorial, they stated that the Shriram is solely liable for the amounts claimed as hereunder: "(i) € 1,928,729.06 towards the outstanding payment for delivery four; (ii) € 1,455,800.00 towards storage fees owing in relation to delays to delivery one, two, three and four as calculated upto April 4, 2014, which amount continues to accrue at € 12,000 per week in relation to delivery four, which remains in storage; (iii) € 23 .....

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breaches and delays." 5. The petitioner's contention is that the Shriram, the ET and the petitioner had agreed not to make the ET a party to the arbitration proceedings on the basis that the Shriram would take no point on the absence of the ET from the arbitration and did not contend that the ET was in any way responsible for the amounts as claimed by the petitioner. 6. The Arbitral Tribunal held that it has no jurisdiction in respect of claims against the APL and the CIAL for the breac .....

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and the administrative expenses of the ICC; and (iv) simple interest @ 3.5% p.a. on the amounts outstanding under the award from the date of the award until payment." 7. The petitioner's case is that the Shriram is bound by the foreign award dated 12.2.2015, as it has become final and the petitioner is entitled to enforce the award in India and that the award has not been set aside or suspended by any competent court of the country, in which, the said foreign award was made and the enf .....

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ules and English Law, but also against the public policy of India, equity, good conscience and natural justice under the provisions of the Act and that the Shriram was deprived of an opportunity to even cross examine the witnesses in the arbitration proceedings. 9. It has been further stated by the respondent that the impugned foreign award is unstamped and unregistered and requires to be stamped compulsorily under the provisions of the Indian Stamp Act and hence, its recognition and enforcement .....

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the Shriram alone. Thus, the Tribunal allowed the petitioner to erode and alter the very basis of the reference to arbitration to the disadvantage of the respondent. There has been violation of the principles of natural justice, as the Shriram was not given an opportunity to present its case on several issues. 10. In the counter affidavit, it has been further stated that the award is further vitiated by non-joinder of necessary parties namely, the APL and the CIAL especially when the petitioner .....

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the counter statement, the Shriram set out as to how the findings of the Arbitral Tribunal on the factual aspects are not sustainable. With these averments, the respondent seeks to reject the petition filed under Section 47 of the Act. 12. A rejoinder has been filed by the petitioner. While denying the factual allegations, the petitioner seeks to rely upon the decisions in the case of (i) Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. [reported in 2012 (9) SCC 552] and (ii .....

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p Act speaks about execution and a foreign award, having been not executed in India, but only sought to be enforced in India, stamping is not required. 14. In support of the said contention, reliance has been placed on the decision of the Delhi High Court in the case of Naval Gent Maritime Limited Vs. Shivnath Rai Hanarain (I) Ltd. [reported in MANU/DE/2364/2009] and the decision of the Bombay High Court in the case of Vitol S.A. Vs. Bhatia International Limited [reported in MANU/MH/1615/2014]. .....

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S.A. Vs. Sakuma Exports Limited [reported in MANU/MH/2613/2015]. 16. Mr. Vishnu Mohan, learned counsel appearing for the respondent/Shriram submitted that various important grounds for opposing the enforcement of the award have been raised in defence and pointed out that as held by the Hon'ble Supreme Court in Shri Lal Mahal Ltd., under Section 48(2)(b) of the Act, the enforcement of a foreign award can be refused only if such enforcement is found to be contrary to (i) fundamental policy of .....

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meaning given to the term 'public policy' in Renusagar Power Co. Ltd. Vs. General Electric Co. [reported in 1994 Supp. (1) SCC 644], it is required to be held that the award could be set aside if it is patently illegal and if it is contrary to the fundamental policy of Indian Law or the interest of India or justice or morality or in addition, if it is patently illegal. Illegality must go to the root of the matter." 18. The Hon'ble Supreme Court in the same decision, while answer .....

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inciple that a court and so also a quasi judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Perversity or irrationality of decisions is to be tested on the touchstone of Wednesbury principles of reasonableness. 19. Therefore, it is submitted that the respondent is entitled to oppose the relief sought for raising all these contentions as pointed out by the Hon'ble Supreme Court and the grounds .....

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ent also, which is part of the instrument. 21. On the issue relating to stamping and registration of the award, reliance was also placed on the decision in the case of M. Anasuya Devi Vs. M. Manik Reddy [reported in 2003 (8) SCC 565] to support the proposition that the issue relating to non stamping can be raised only when the party seeks enforcement of the award. Thus, it is the submission of the learned counsel for the respondent that the agreement, though executed outside India, it has to be .....

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ned counsel for the respondent next proceeded to deal with the factual aspects and made elaborate submissions on the issue that when the petitioner submitted themselves for arbitration, in the First Memorial, the respondent has been made jointly and severally liable along with others namely APL and CIAL. But, in the Second Memorial, the respondent alone has been made solely liable and an award has been passed against the respondent alone, which is illegal. 24. In this regard, the learned counsel .....

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e Hon'ble Supreme Court in Shri Lal Mahal holds the field and in terms of the said decision, the factual contentions raised by the petitioner cannot be adjudicated by this Court, as the award has become final. Further, with regard to the factual contentions, it was submitted that the arbitration claim arose under Clause 17 of the agreement and not under the MPA and that the Arbitral Tribunal was perfectly justified in making the respondent liable. Furthermore, there is no claim under the MPA .....

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e the Second Memorial, which, in fact, they have done. Therefore, it was submitted that the above original petition may be allowed and Shriram may be directed to disclose the assets to enable the petitioner to execute the award. 27. Heard the learned counsel for the parties and perused the materials placed on record. 28. This is petition under Section 47 of the Act seeking enforcement of the foreign award. The said provision lays down procedural requirements that need to be complied with by a pa .....

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e enforced. The three decisions, which were considered by the Hon'ble Supreme Court, are in the cases of (i) Renusagar Power Co. Ltd. Vs. General Electric Co. [reported in 1994 Supp. (1) SCC 644]; (ii) Saw Pipes Ltd.; and (iii) Phulchand Exports Ltd. Vs. O.O.O. Patriot [reported in 2011 (10) SCC 300]. 29. In Renusagar Power Co. Ltd., one of the questions framed for determination is 'what is meant by public policy in Section 7(1)(b)(ii) of the Foreign Awards Act'. While explaining the .....

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iples 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 Protocol & Convention Act of 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 .....

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ot;public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality." 30. .....

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Saw Pipes Ltd., as follows: "The term 'public policy of India' in Section 34 was required to be interpreted in the context of the jurisdiction of the court where the validity of the award is challenged before it becomes final and executable in contradistinction to the enforcement of an award after it becomes final. Having that distinction in view, with regard to Section 34, this Court said that the expression 'public policy of India' was required to be given a wider meaning. .....

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t." 31. Thus, after referring to the above decisions, it was pointed out that while accepting the narrower meaning given to the expression 'public policy' in Renusagar Power Co. Ltd. in the matter of enforcement of foreign awards, there was a departure from the said meaning for the purposes of jurisdiction of the court in setting aside the award under Section 34. It was further pointed out that what has been stated by the Court in Renusagar Power Co. Ltd. with regard to the Foreign .....

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ed out that although the same expression 'public policy of India' is used both in Sections 34(2)(b)(ii) of the Act and 48(2)(b), the concept of public policy in India is same in nature in both the Sections, but its application differs in degree in so far 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 domestic arbitral award. 33. .....

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down in Saw Pipes Ltd., would govern the scope of such proceedings. Therefore, it was held in paragraph 29 as follows: "We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (1) fundamental policy of Indian Law; or (2) the interests of India; or (3) justice or morality. The wider meaning given to the expression 'public policy of India' occurring in Section 34(2)(b)(ii) in Saw Pipes Ltd. is not appl .....

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enquiry does not permit review of the foreign award on merits and that 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. Paragraphs 45 and 47 of the judgment read as follows: "Moreover, Section 48 of the 1996 Act does not given an opportunity to have a 'second look' at the foreign award in the award enforcement stage. The scope of inquiry under Section 48 does no .....

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reign 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)." 35. Once we stee .....

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Even in paragraph 35 of the decision, the Court was answering the issue as to what would constitute the fundamental policy of Indian Law and one of which was to adopt a judicial approach in the matter. Therefore, in the considered view of this Court, the decision in Western Geco International Ltd., does not lend support to the case of the respondent. 36. With regard to the other legal objection raised by the learned counsel for the respondent, it is with regard to stamping of the award and on ac .....

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Court, the decision in the case of M. Anasuya Devi cannot be made applicable to the facts of the present case, as the Court was not considering a petition seeking implementation of a foreign award, which was sought to be resisted by the respondent raising various contentions including the aspect regarding stamp duty. 38. In SMS Tea Estates (P) Ltd., two questions arose out of a proceeding under Section 11 of the Act for appointment of an arbitrator. The Hon'ble Chief Justice of the Gauhati H .....

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reement in an unregistered instrument, which is not duly stamped, is valid and enforceable. After taking into consideration Sections 33 and 35 of the Indian Stamp Act, it was pointed out that unless the stamp duty and penalty due in respect of the instrument is paid, the Court cannot act upon the instrument. 39. Firstly, it has to be pointed out that the said decision does not deal with enforcement of foreign award and no objection appears to have been raised by the respondent when the arbitrati .....

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the 1996 Act, it was held that the object of the Act is to minimise the supervisory role of the Court and to give speedy justice and whatever procedure was under the old Enactment cannot be insisted upon under the New Act. One important observation made in the said decision was with regard to the difference under the Foreign Awards Act and the 1996 Act namely that while under the Foreign Awards Act a decree follows, under the 1996 Act, the foreign award is already stamped as the decree and that .....

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milar objection as raised by the respondent/the Shriram in this petition about non stamping of the award. The Court, after referring to the decision of the Hon'ble Supreme Court in the case of Harendra H. Mehta Vs. Mukesh H. Mehta [reported in 1999 (5) SCC 108], held that foreign award would not require registration and can be enforced as a decree. The relevant portions read as follows: "In view of the above judgment, the foreign award would not require registration and can be enforced .....

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nder Sections 47 and 48 cannot hold the award non enforceable on the ground of award being not registered or unstamped. It is settled law that a foreign award can be enforced or executed in the same proceedings as was held by the Supreme Court in Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd. MANU/SC/0329/2001 :2001 (6) SCC 356. The present award was passed in England and it became binding between the parties since its validity was not assailed by the judgment debtor in England. The judgment deb .....

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titioner/decree holder and being renewed from time to time under the directions of the Court is allowed to be encashed by the decree holder. After getting the bank guarantee encashed, if any further amount remains to be paid by the judgment debtor, decree holder would be at liberty to take steps for further execution." 42. In the light of the above decisions, the contentions raised by the respondent that the foreign award is unenforceable on account of non stamping, stands rejected. 43. Thi .....

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morial, the respondent alone was made solely liable. This, according to the learned counsel for the respondent, goes to the root of the matter, thereby, affecting the very validity of the award and lack of opportunity to the respondent to contest the same. 45. On a perusal of the impugned award, factually it appears otherwise and the Arbitral Tribunal considered this objection and rendered its finding from paragraph 179 onwards and ultimately held that APL and CIAL are not parties to the arbitra .....

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