TMI Blog2017 (8) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... en Sen, J. For the Award-Holder: Mr. Tilak Kumar Bose, Sr. , Mr. Sailendra Jain, , Mr. Asit Dey, For the Judgment-Debtor/Applicant: Mr. Anindya Kr. Mitra, Sr. , Mr. Surojit Nath Mitra, Sr. , Mr. D.N. Sharma, , Mr. S. Sarkar, , Mrs. S. Mukhopadhyay, , Mr. T. Aich, JUDGMENT Soumen Sen, The judgment-debtor is the applicant. The judgment-debtor has filed this application ostensibly under Section 48 of the Arbitration and Conciliation Act, 1996 but essentially for having a second look at the foreign award, notwithstanding an earlier order dated 4th September, 2014, by which the question of maintainability including enforceability of the foreign award was decided. The earlier challenge was oral. This time an application has been filed disclosing further grounds of challenge to the enforceability of the award. The present application highlights a cosmetic difference between the expression maintainability and enforceability used in the order dated 4th December, 2014. The award-holder has filed an application for enforcement of a foreign award in November 13, 2013. Initially, the execution application was not accompanied by the original awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted the respondent notwithstanding the objection raised by the decree-holder that no challenge in writing has been made with regard to the enforceability of the award to argue on the maintainability of the award meaning thereby the enforceability of the award. The judgment debtor raised five objections with regard to the enforceability of the said award. The said objections are recorded in the order dated 4th December, 2014. The said objections as recorded in the order are reproduced below:- The first objection raised is that no prayer for declaration has been made in the application that the foreign award is enforceable. It is submitted that unless prayer is made seeking a declaration as to the enforcement of the award, the Court cannot assume jurisdiction. In this regard, the learned Senior Counsel has referred to a Single Bench decision of the Bombay High Court in the case of Toepfer International Asia Pvt. Ltd. Vs. Thapar Ispat Ltd., reported in 2000 (1) Arb. LR 230(Bombay) Paragraph 19. The second objection is that a civil suit is pending between the parties in which there is a categorical observation both by the learned Single Judge as well as the Division Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Section 48. 48. Conditions for enforcement of foreign awards.- (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) the composition of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the various statutes regarding enforcement of a foreign award. The legislative intent underlying the Act is to minimize the supervisory role of the courts in the arbitral proceedings and very limited interference. The objection raised by the petitioner appears to be more in quagmire of despondency and a desperate attempt to resist execution of an enforceable award rather than a real challenge thrown to the maintainability of the said petition. There is no document disclosed by the respondent to show that any objection was raised either with regard to the initiation of proceeding or thereafter. The only explanation offered was that such proceeding is vexatious, harassive and involves probative costs. This argument was not accepted by the Division Bench. In any event, when the notice invoking the arbitration was issued there was no reply to the said notice. Mr. Mitra submits that the disputes shall be required to be submitted to GAFTA, London for arbitration and the decree-holder would not be entitled to invoke the clause unilaterally for appointment of an arbitrator. In my opinion, this submission cannot be accepted. It is an institutionalized arbitration, the rules provide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be clear from the Special Leave Petition and the grounds taken thereunder that the award-debtor has understood the findings of this Court as a finding on Section 48 of the 1996 Act. If any point that was available to the respondent was not urged when an opportunity was given to the applicant/judgment-debtor to raise all objections with regard to the enforcement of the award it shall be deemed to have been waived and operate as a constructive res judicata. The order dated 4th December, 2014 is final in so far as the objections under Section 48 of the 1996 are concerned. It cannot be re-opened after two years by filing an application when the applicant notwithstanding a remedy available to it did not file any such application and allowed execution proceeding to continue. In fact, notwithstanding any application being filed by the judgment-debtor to question the enforcement of the foreign award, the said applicant was permitted to take all possible defences available to the applicant and it was only on consideration of such objections, the order dated 4th December, 2014 was passed. A review application filed was also dismissed. In view of the aforesaid, the objection raised wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as a res judicata when the matter now is required to be finally decided on merits. Although at this stage, the Court could have easily declined to consider the objections raised at such a belated stage and find considerable substance in the argument made on behalf of the award-holder that this application is barred by issue estoppel, cause of action estoppel and constructive res judicata, however, an opportunity was given to the petitioner/applicant to argue with regard to the enforceability of the award. On other points as I felt that if the award is contrary to public policy of India it should not be enforced. Before I deal with the objections raised in relation to the enforceability of the award, a brief narration of facts necessary to understand and appreciate the nature of objections are stated below. The award-holder entered into a contract dated 25th October, 2010 for sale of 15000 metric tons +/- 5% at Buyer s option, Non Basmati Parboiled Rice 15% (Maximum) broken, 2009-10 or latest crop, Thailand origin at the rate of USD 450 per metric ton. The contract contains stipulation that the quantity would be final at the Port of loading as per official weight cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cargo payable at 30 days after shipment date and balance amount @ US$ 10.00 per MT will be payable after receipt of quality inspection report of destination port. 4. Shipment By 31/12/2010 5. Documents Required Certificates under Sl. No.G, I, J K issued by ISC are acceptable I/O existing. The contract stipulates that the shipment shall be by 15th November, 2010. The original L/C dated 3rd November, 2010 mentioned date and expiry of L/C as 21st December, 2010 and latest date of shipment as 30th November, 2010 respectively. All the three shipments were made after 21st December, 2010. In order to extend the shipment both contract and L/C were amended. Under the amended contract dated 7th December, 2010, shipment was to be made by 31st December, 2010. The buyer, accordingly, amended the Letter of Credit on 9th December, 2010 by extending the period of shipment. The validity period of the Letter of Credit after first amendment was 15th January, 2011 and the latest date of shipment was mentioned as 31st December, 2010. Within the validity period of the Let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negotiating the documents requested the sellers on 27th January, 2011 to present the export documents as per contractual terms to Bank of Baroda, Kolkata. The buyers confirmed that they would accept the documents on presentation. This consignment was not covered under the Letter of Credit. This arrangement was confirmed by the award-debtor in an e-mail on 27th January, 2011 stating that:- upon receipt of documents Bank of Baroda will send a SWIFT message to your bank in Bangkok confirming the acceptance of documents and payment thereof. The buyers on 1st February, 2011 wrote to Bank of Baroda as under:- With reference to above, we understand that you have received the original shipping documents valued USD 3,823,488.90 from M/s. Sleepwell Industries Co. Ltd., Thailand for 8,689.55 MT of Non-Basmoti Parboiled Rice. We hereby accept the documents under your import intimation Ref No.1152FIBC006711 dt.01/02/2011 and authorized you to remit USD 3,823,488.90 by debiting out current account equivalent in INR on maturity date, i.e. on 16/02/2011 under advice to us. Please release the original shipping documents at the earliest. The sellers received the message from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remit the complete invoice amount. In between, on 14th February, 2011, the awardholder agreed to accept provisional payment of 90% of the value of the invoice amounting to USD 3,823,488.90 submitted to bank of Baroda and balance 10% to be settled after inspection and finalization. LMJ was requested to arrange to remit 90% funds to Bangkok Bank. On the same date, another e-mail was sent by the seller to LMJ giving particulars of two persons who would visit Mongla Port for carrying out the necessary inspection. LMJ on receipt of the said communication, accordingly, instructed his banker for release of payment. Ultimately, the seller received 90% payment of the invoice of USD 3,823,488.90 on 21st February, 2011. The correspondence and e-mail both dated 14th February, 2011, however, were not disclosed in the arbitration proceeding and serious exception was taken by the petitioner in this proceeding for non-disclosure of the said two documents. The seller thereafter on 9th March, 2011 requested the buyer to pay the balance of 10% to which the buyers replied the next date advising sellers, inter alia, that also with the first two partial shipments, quality problems did indeed arise. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th June 2012 GAFTA appointed Mr. C. Debattista as the third Arbitrator and Chairman of the Tribunal. The first objection raised on behalf of the petitioner is that the impugned award was induced and/or affected by fraud and, therefore, is in conflict with the Public Policy of India. It is submitted that the Public Policy of India has received consideration by which High Courts including the Hon ble Supreme Court means:- i) Fundamental policy of Indian law; ii) Patent illegality going to the root of the matter; iii) Wednesbury s principle of reasonableness; iv) Natural justice; v) Non-judicial approach; vi) Against terms of the contract. In this regard reliance has been placed on the decisions of the Hon ble Supreme Court in Associate Builders Vs. Delhi Development Authority reported at 2015 (3) SCC 49 Paragraphs 40 to 42 and Delhi Development Authority Vs. R.S. Sharma and Co., New Delhi reported at 2008 (13) SCC 80 Paragraph 21. The learned Senior Counsel has referred to the Explanation to Section 48(2) of the Arbitration and Conciliation Act, 1996 and submits that in view of the suppression of two communications of the claimant both dated 14th February, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents was obtained by operation of letter of credit. The claimant did not raise any claim for payment of the balance 10% from Bank of Baroda under the bill of exchange, because they avoided holding of joint inspection and finalization at 10% and settlement after joint inspection as agreed by the claimant by its letter and e-mail dated February 15, 2011. This letter of 15th February, 2011 was relied upon by the claimant for misleading the Arbitral Tribunal into thinking that buyer had instructed Bank of Baroda to release of 90% of the 3rd invoice without mentioning that it was because the claimant s agreement to accept 90% payment of the 3rd invoice on the terms and conditions as confirmed by the letter of 14th February, 2011. The claimant suppressed the letter dated 14th February, 2011 and only disclosed the letter of 15th February, 2011 before the Arbitral Tribunal with a view to mislead the Tribunal. The claimant did not raise any invoice for the balance 2.22% of the sale price payable under the L/C and balance 10% receivable under the Bill of Exchange and hence no dispute could have arisen regarding balance 2.22% of the sale price of fictitious invoices and 10% of the 3rd i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission it is not averred by the claimant that under GAFTA Sampling Rules 124 the buyer was obliged to provide certificate of analysis. This new case made out by the Arbitral Tribunal in paragraph 6.2.1 of the award is also in violation of principles of natural justice. The buyer was never informed that such new case would be made out by the Arbitral Tribunal in their award. The new cases made out by the Arbitral Tribunal were beyond the scope of submission to arbitration and, accordingly, not enforceable under Section 48(1)(c) of the Act. The Tribunal has no jurisdiction to make out a new case or to consider the dispute not raised by the claimant in their claim submission. In this regard reliance is placed on Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported at 53 CWN 873 and Jasraj Inder Singh Vs. Hemraj Multanchand reported at AIR 1977 SC 1011. The third objection is that the award is perverse. The Arbitral Tribunal s uncalled for reliance on GAFTA Sampling Rules 124 clause 6.1 is wholly perverse. The contract as amended and recorded in the award in Paragraphs 6, 15, 6.16 and 6.17 does not provide that the buyer was to obtain quality inspection report of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n report of the destination port and without inspection and finalization as proposed and agreed by the seller should shock judicial conscience. The award is totally contrary to Wednesbury s principle of reasonableness and would shock judicial conscience. The learned Senior Counsel has referred to the contract terms set out at page 5 of the claim submission which reads:- all other terms/conditions not in contradiction with the above as per GAFTA Contract No.48. The amendment of the contract is also admitted by the claimant in the claim submission and also by the Tribunal in Paragraph 6.17 of the award. There is no explanation, reason or justification given by the Arbitral Tribunal on the basis of which it holds that the buyers were obliged to provide the certificate of analysis. Clause 6.1 of the GAFTA Sampling Rules No.124 nowhere provides that the buyers were obliged to provide the certificate of analysis. There is a complete non-judicial approach. The findings of the Arbitral Tribunal in paragraphs 6.18, 6.20 and 6.22 is contradictory to its own finding given in paragraphs 6.15, 6.16 and 6.17 of the award which would demonstrate that the Tribunal lacked judicial app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied upon the decision of the House of Lords in Shamsher Jute Mills Ltd. v. Sethia (London) Ltd. reported at (1987) 1 Lloyds Law Report 388 at Pages 390-393 which considers W.J. Alan Co. v. El Nasr Export Import Co. reported at (1972) 2 All ER 127 and Ficom S.A. v. Sociedad Cadex Limitada reported at (1980) 2 Llyod s Law Report 188. Therefore, the award suffers from patent illegality going to the root of the matter. This illegality goes to the root of the award. The learned Senior Counsel has, thus, concluded that it would be evident from the aforesaid that the award is contrary to Public Policy of India as envisaged under Section 48(2)(b) and Explanation therein. Therefore, the award is not enforceable in India. The learned Senior Counsel has relied upon the decision of the Hon ble Supreme Court in Oil and Natural Gas Corporation Ltd. Vs. Western Geco International Ltd. reported at 2014 (9) SCC 263 Paragraph 38 in support of the contention that the objection with regard to the enforceability of the award on the ground of public policy can be raised even without any pleading. Although in the instant case, it is admitted that the grounds of challenge on public polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter of Credit was established for the balance quantity of 2000 MT in the old contract. LMJ by the letter dated 5th February, 2011 informed the Sleepwell that extension of existing L/C from Standard Chartered Bank was not acceptable and that fresh L/C shall have contemplated for balance 2000 MT. This 2000 MT is the balance quantity that had remained undelivered out of the contractual quantity of 15000MT. Mr. Bose has referred to the emails dated 26th January, 2011 and 27th January, 2011 to show that it is an admitted position that the Letter of Credit had expired and, accordingly, the question of submitting any document to the negotiating banker under the L/C even for the earlier of shipments covered by the Letter of Credit could not and does not arise inasmuch as the third shipment is not covered by any L/C but by the Bill of Exchange. Mr. Bose has emphasized on the finding of the arbitral tribunal that the contract came to an end since no new L/C was established after the latest date of shipment under the amended L/C expired on 15th January, 2011 and the shipment was done on 17th January, 2011. In responding a submission made on behalf of the applicant regarding non-receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 2010. Under the contract payment of the first instalment (440 USD per M.T.) was payable 30 days from the date of shipment. Obviously, the balance USD 10 per MT was to be paid subsequently after receipt of quality inspection report at destination port. The claimant by several emails asked for valid Letter of Credit. Mr. Bose has referred to the emails dated 26th January, 2011, 27th January, 2011, 4th February, 2011 and 5th February, 2011. In the meantime, the validity of the entire Letter of Credit by reason of shipment on MV Tu Man Gang became questionable. It is LMJ who suggested that the document should now be presented outside Letter of Credit. By the time the original documents under MV Tu Man Gang in respect of 97.78% were released, even the validity period of the Letter of Credit, which was valid till 30th January, 2011, expired. It is preposterous to argue that for MV Tu Man Gang, the documents relating to 97.78% of the goods could not be negotiated under the Letter of Credit, but for the balance 2.22% of goods under the same shipment documents can be validly negotiated under the same Letter of Credit. Similarly, by the time the second instalment i.e. 2.22% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various reminders from sellers. This finding of the arbitral tribunal cannot be faulted. With regard to the composition of the Arbitral Tribunal the learned Senior Counsel has relied on the findings arrived at by this Court earlier in the order dated 4th December, 2014 by which it was held that the composition of the Arbitral Tribunal does not suffer from any infirmity. It is submitted that this finding is final and cannot be reopened in this application. However, he has submitted that the notice invoking the arbitration is dated 28th July, 2011. The email referred to in the said letter is lmjajit1@gmail.com. Receipt of this email is not disputed. There is yet another letter dated 28th July, 2011. The letter relates to the second contract, but there is a similar one for the first contract which has not been annexed. The said letter is addressed to lmjajit1@gmail.com. The letter specifically refers to Rule 3.2(a) and (b) of the GAFTA Rules, 125 and appointment of Mr. R.A. Barber as Arbitrator on behalf of the claimant. This letter is also not disputed by LMJ. In fact, Paragraph 31 and 32 of the application reads as follows: 31. By a cryptic letter dated 28th July, 2011, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17th March, 2015. From the order dated 4th December, 2014, a Special Leave Petition was filed which was rejected on 27th February, 2015. In the Special Leave Petition, LMJ always treated the order dated 4th December, 2014 as disposing of objections regarding enforcement. A Review Petition was filed. In the Memorandum of Review also LMJ treated the order dated 4th December, 2014 as disposing of objection regarding enforcement. The order dismissing the review petition is dated 8th June, 2015. The words maintainable and enforcement both, however, appears in the order dated 4th December, 2014 and LMJ now wants to contend that enforceability was not decided on 4th December, 2014. It is pertinent to mention that the word maintainable does not appear anywhere in Section 48 and the only two relevant words are recognition and enforcement . In any event, LMJ is estopped from contending that the objection regarding enforceability was not considered on 4th December, 2014. In distinguishing the decisions relied upon by the applicant on the question of res judicata it is submitted that it is preposterous to argue that a matter regarding enforceability which has been decided by a l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the fundamental issue is, whether the award is enforceable or not. It has been declared to be enforceable on 4th December, 2014 and the LMJ is estopped from raising this issue again. When an application for enforcement of a foreign award is filed, a party who wishes to contest the enforceability of the said award has a cause of action and this cause of action is to contest the enforceability. This he may do merely by filing an affidavit or by filing an application or resisting orally the execution application. The question is whether LMJ exhausted this cause of action or not. If LMJ has exhausted this cause of action then there is cause of action estoppels operating against LMJ. Mr. Bose submits that the three English judgments referred to by LMJ in support of the proposition that by reason of a valid Letter of Credit opened by buyer LMJ, payment obligation has been discharged by the buyer and the seller cannot look for payment other than under the Letter of Credit are academic. Firstly, there was no valid Letter of Credit inasmuch as the valid date of the Letter of Credit and the last date of shipment was 15th January, 2011 whereas the bulk shipment of over 8000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bose has referred to Shrilal Mahal Ltd. (supra) and submits that the principles of public policy applied in relation to foreign award governed by the Foreign Award (Recognition and Enforcement) Act, 1961 had been extended by the Hon ble Supreme Court in the context of foreign awards under the Arbitration and Conciliation Act, 1996. It is submitted that the same view has been reiterated by Justice Sanjib Banerjee in an unreported decision in Canadian Commercial Corporation Vs. Coal India Limited being G.A. No.3547 of 2013 with E.C. No.281 of 2013 dated 21st September, 2016. It is submitted that the judgment in S.P. Chengalvaraya Naidu (supra) cannot assist the petitioner as a party who does not choose to appear in the arbitration proceedings cannot raise such grounds of fraud. The fact that Statement of Claim was served and received by LMJ is admitted. If LMJ was so concerned about suppression it should have pointed out the same to the Arbitral Tribunal. Mr. Bose submits that LMJ not having contested the Arbitration proceeding and filed the written statement is estopped from contending that documents have been suppressed and such suppression amounts to fraud. In any event, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the country where the arbitration took place; or (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the Court finds that- (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation.-Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of subsection (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. The grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize only public policy as embodied in the Constitution, the laws and judicial decisions. There may be matters of public policy which are not embodied in laws or judicial decisions or the Constitution. The Courts will not take cognisance of such matters. But what is contrary to law may not necessarily be contrary to public policy. It is only when a law embodies public policy that its violation will lead to an action which is contrary to public policy. 81. In the case of (Murlidhar Agarwal v. State of Uttar Pradesh), reported in A.I.R. 1974 S.C. 1624 the Supreme Court considered the public policy aspect of the Rent Control legislation. The Supreme Court has observed (pg. 28): The expression public policy has an entirely different meaning from policy of the law and one much more extensive............... It seems clear that the conception of public policy is not only now quite distinct from that of the policy of law but has in fact always been so except in some exceptional instances of confusion which have had no substantial effect on the general course of authority. X X X X X public policy has been defined by Winfield as a principle of judicial legislation or interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw. The rule remains, but its application varies with the principles which for the time being guide public opinion. 84. In the present case, the awarding of compound interest by the arbitrators cannot be said to violate any public policy of this country. In the first place, there are several types of cases where even Courts award compound interest e.g. if there is an agreement between the parties to this effect. In fact, in all banking transactions which the Courts enforce the banks invariably charge on loans granted by them compound interest not merely with interest compounded annually but much more frequently such as every quarter. All these agreements are enforced by Courts and these have not been held as void on account of being contrary to any public policy. Had there been any public policy prohibiting charging of compound interest, the parties could not have, by an agreement between them, opted out of a matter, of public policy. In an appeal from the said judgment by Renusagar, the Hon ble Supreme Court upheld the judgment of the Division Bench. The decision is reported at AIR 1994 SC 860 (Renusagar Power Co. Ltd. Vs. General Electric Co.). It was held that the defenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7th Edn., p. 165). 63. In view of the absence of a workable definition of international public policy we find it difficult to construe the expression public policy in Article V(2)(b) of the New York Convention to mean international public policy. In our opinion the said expression must be construed to mean the doctrine of public policy as applied by the courts in which the foreign award is sought to be enforced. Consequently, the expression 'public policy' in Section 7(1)(b)(ii) of the Foreign Awards Act means the doctrine of public policy as applied by the courts in India. This raises the question whether the narrower concept of public policy as applicable in the field of public international law should be applied or the wider concept of public policy as applicable in the field of municipal law. 64. Keeping in view the object underlying the enactment of the Foreign Awards Act, this Court has also favoured a liberal construction of the provisions of the said Act. In Renusagar case I it has been observed: (SCC p. 723, para 50) It is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy 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. V. Is the award contrary to public policy of India? The aforesaid decision was considered in Shrilal Mahal Ltd. (supra). In the said decision it was held that the expression Public Policy of India in Section 48(2)(b) has the same import as that of Public Policy in Section 7(1)(b)(ii) of Foreign Awards (Recognition and Enforcement) Act, 1961. The Hon ble Supreme Court held that contravention of law alone would not attract bar of public policy and something more than contravention of law is required to be established to resist enforcement of a foreign award as contrary to public policy of India. After considering the decisions in Renusagar (supra) and ONGC Ltd. Vs. Saw Pipes Ltd. reported at (2003) 5 SCC 705, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding for setting aside an award under Section 34 is concerned, the principles laid down in Saw Pipes1 would govern the scope of such proceedings. 29. We accordingly hold that enforcement of foreign award would be refused under Section 48(2)(b) only if such enforcement would be contrary to (i) 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 Pipes1 is not applicable where objection is raised to the enforcement of the foreign award under Section 48(2)(b). 30. It is true that in Phulchand Exports, a two-Judge Bench of this Court speaking through one of us (R.M. Lodha, J.) accepted the submission made on behalf of the appellant therein that the meaning given to the expression public policy of India in Section 34 in Saw Pipes1 must be applied to the same expression occurring in Section 48(2)(b) of the 1996 Act. However, in what we have discussed above it must be held that the statement in paragraph 16 of the Report that the expression public policy of India used in Section 48(2)(b) has to be given a wider meaning and the awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consciously avoided a proceeding and did not participate in the arbitration proceeding to allege at the stage of enforcement that the award is vitiated by fraud by nondisclosure of a document. It was incumbent upon the buyer to respond to the several notices issued by the Tribunal and to submit its defence. Although, the said letter may not have been produced but subsequent correspondence between the parties were disclosed which clearly shows that the claimant buyer has categorically denied its obligation to produce any quality inspection report at the port of destination. The Tribunal was conscious of the fact that payment was refused in view of alleged failure by the seller to produce the quality inspection report at the port of destination and dealt with the issue and arrived at a finding that the seller is not responsible. The Tribunal has the jurisdiction to decide the issue and has decided the issue in one way or the other. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. Arbitration is consensual and some amount of laxity should be given while scrutinizing an award. A sense of informality i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard on the ground that it is against public policy. The buyer has argued that there has been a breach of natural justice and the finding of the arbitral tribunal that the buyer was responsible to produce the quality certificate at the port of discharge is contrary to the terms of the contract which should shock the conscience of the Court and such finding is against justice and morality. It is a settled law that interpretation of the contract and appreciation of the evidence by the arbitral tribunal cannot be reopened by arguing that the foreign award is contrary to the contract and, therefore, its enforcement would offend public policy of India. A party who has consciously and deliberately avoided a proceeding knowing fully well that the result of the proceeding may be adverse to its interest cannot complain of violation of natural justice. The petitioner was under no disability and nothing has prevented the petitioner to file its statement of defence along with documents. The petitioner is in effect seeking a review of the foreign award on merit which is not permitted in this proceeding. Lord Mansfiled in Holman v. Johnson stated that the principle of public policy is ex dolo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins and Dead, Damages and Discoloured Grains , the results provided by ISC were well within the parameters foreseen for the quality under the Contract. 6.11. The Tribunal therefore finds that the quality of the cargo shipped on the three vessels was within the amended contractual specifications. 6.12. In addition to the above, the relevant provision of the Quality Clause 5 of GAFTA Contract No.48, being a Tale Quale contract as such, states, inter alia: Certificate of Inspection at time of loading shall be final as to quality . 6.13. Consequently, and under consideration of the Payment Term of the Contract providing for payment on receipt of the shipping documents , inter alia the above Pre-Shipment Certificates as issued by ISC and provided by Sellers, Sellers were duly entitled to trigger payment under the Contract. 6.14. We therefore find that Sellers claim for payment of USD 440.00 per metric ton for all three partial shipments succeeds. 6.15. In reference with the balance of USD 10.00 per metric ton for each partial shipment, as agreed under the Amendment dated 7th December, 2010, the Amendment provided that the Balance amount @ US$ 10.00 per MT will be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment under a letter of credit to be opened by the buyer ships the goods but fails to obtain payment under the credit because of a failure on his part to comply with its terms, may he recover the contract price or damages for nonacceptance against the buyer. It appears from the judgment that there is no clear evidence to establish that what exactly happened to the goods. Neither buyers nor sellers derived any benefit. The sellers central contention was that a letter of credit is conditional payment only. If, therefore, a seller duly ships the goods and fails to obtain the payment under the letter of credit he is entitled to recover the price directly from the buyer, at any rate once the letter of credit has expired. The buyers appear to have agreed that a letter of credit is a conditional payment only, but contend that it is under the parties contract the sole method of payment agreed. Justice Bingham on consideration of the materials on record stated that if the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms of the contract, require, the buyer is discharged: that was the Ficom case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the dispute may have to be resolved by defining where possible by means of implication or by resort to any approved custom of the trade, the terms upon which the parties must be taken to have agreed that the letter of credit should in due course be issued. In Gutteridge Megrah s Law of Bankers Commercial Credits, 8th Edition, the learned Author made the following observation with regard to the said decisions:- 3-29 In Ficom SA v. Sociedad Cadex Limitada and Shamsher Jute Mills Ltd. V. Sethia (London) Ltd. non conforming documents were presented under the credit. In the former case the sellers then disposed of the goods for their own account and in the latter the goods appear to have been sold in satisfaction of freight or warehouse costs with neither seller nor buyer deriving any benefit. In both cases it was held that the seller could only obtain the price through the letter of credit. In Shamsher Jute, Bingham J. said: If the seller fails to obtain payment because he does not and cannot present the documents which the terms of the credit, supplementing the terms of the contract, require the buyer is discharged: that was the Ficom case. In the ordinary case, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon which the seller could have been defeated in his claim for the price would have been that the seller was solely responsible for the failure of the primary source of payment. (emphasis supplied) The learned Authors have also discussed the consequences of breach in the following Paragraphs:- 3-42.Where the buyer fails to open a letter of credit in accordance with the contract of sale by the date required by the contract, this constitutes a repudiation of the contract and the seller is entitled to treat the contract as terminated and claim damages for non-acceptance of the goods. 3-43. Where the seller fails to perform an obligation which is a condition precedent to the buyer s obligation to open the credit or fails to present conforming documents to the bank within the time stipulated in the credit, this constitutes a repudiation of the contract of sale and the buyer is entitled to treat the contract as terminated and claim damages for non-delivery of the goods. 3-44. If the seller presents conforming documents to the bank, this will discharge his obligations under the contract in relation to the documents and he will be able to recover the sum due under the let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable for the price. However, the legal basis for reaching this solution may be difficult to predict without knowledge of the precise circumstances. It might be held that by instructing the bank not to pay against the documents because of the discrepancies (the bank will usually request the buyer s instruction), the buyer has waived and right to treat the credit as payment. Where, as is likely, the seller has retained the right to possession of the goods, he has an alternative to his action for the price, which is to sue in the tort of conversion for the value of the goods. The buyer will have converted the goods by taking them if he had no title to them and no right to possession. This remedy is of particular use where the market has risen so that damages may exceed the contract price. In such a situation if the buyer has himself sold the goods perhaps for a higher price the seller may alternatively pursue a restitutionary action to recover the amount received by the buyer as the proceeds of his tort. If the goods have been delivered to the buyer without the buyer having duly presented bills of lading, the seller, if he retains the bills, will have a cause of action against ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
