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TMI Blog2019 (2) TMI 1288X X X X Extracts X X X X X X X X Extracts X X X X ..... contained a stipulation that the quantity would be final at the Port of loading as per the official weight certificate issued by SGS at the cost of the seller, meaning thereby the respondent. The consignments were shipped by the seller as per the said contract. The contract was an FOB contract and the goods were meant for the Government of People's Republic of Bangladesh. The contract in "other terms" envisage that on terms and conditions not in contradiction with the stipulated terms of contract shall be governed by GAFTA 48 and disputes to be resolved by Arbitration 125 as per GAFTA 125 in London. The buyer had opened letters of credit on different dates and the consignments were shipped by the seller. For each single shipment, invoices had been issued by the seller in accordance with the addendum to the contract. Shorn of unnecessary details, be it noted that some dispute arose regarding the inferior quality of rice and nonrelease of the payment towards the invoices raised by the seller in respect of certain shipment, which eventually became the subject matter of arbitration proceedings. The respondent, on 28th July, 2011, invoked the arbitration clause and eventually appointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. versus 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 Bench that any action taken by the parties to the suit during the pendency of the suit shall be subject to and abide by the result of the suit. It is submitted that a cross appeal was preferred by the decreeholder and this observation of the learned Single Judge was not interfered with and accordingly the execution application is premature and unless the suit is decided, the award does not attain its finality. The third objection is that the arbitration clause has not been properly invoked. It is submitted that arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise. To wit, the questions of law and grounds urged in Special Leave Petition (Civil) No.5612 of 2015 (pertaining to contract-I) read thus: "QUESTIONS OF LAW : That the following questions of law of general and public importance arise for consideration of his Hon'ble Court :i) Whether any order in an execution proceeding can be passed before the Court is called upon to decide and declare that the award is enforceable? ii) Whether any declaration as to the enforceability of a foreign award is to be sought by the award holder before seeking to enforce the foreign award? iii) Whether a foreign award which arises out of an arbitration agreement which is under challenge in a properly instituted civil suit, can be put to execution before the suit is heard and disposed of? iv) Whether valid and proper invocation of the arbitration clause is a prerequisite before seeking to enforce the foreign award arising out of the arbitration agreement between the parties? v) Whether in a twotier arbitration mechanism, it is necessary to exhaust the firsttier (i.e. negotiation) before proceeding to formally commence the reference? vi) Whether the executing Court can assume j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngle Judge of the Calcutta High Court totally ignoring the effect of the observation and finding of an order passed by another Single Judge of the Hon'ble High Court duly affirmed by the Division Bench arise out of a previously instituted civil suit. d) For that there was no prima facie case in favour of the respondent and no interim order could have been granted to the respondent. e) For that the High Court erred in failing to call upon the petitioner to file its affidavit on merits and to raise its objection in writing to the executability of the foreign award? f) For that the High Court erred in holding that the affidavit disclosing the Bank Accounts filed by the petitioner in terms of the order dated 18.09.2014 gave a very bleak picture about the financial condition of the petitioner. g) For that the High Court failed to appreciate that the decree holder/ respondent had not met or satisfied the test laid down in Sections 47 and 48 of the Arbitration & Conciliation Act, 1996. h) For that the High Court failed to appreciate the purport and the scope of the Arbitration & Conciliation Act, 1996 and misdirected itself in law and in fact. i) For that the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinbelow: (a) The award holder with intent to deceive and/or to perpetrate fraud on the petitioner actively concealed the factum of filing the suit being C.S.No.196 of 2011 (Sleepwell Industries Ltd. Vs. Bank of Baroda) for US$ 382,348.90 before the Arbitral Tribunal and procured the purported Award including the said sum for, Arbitral Tribunal. (b) The award holder with an intent to deceive the petitioner, made a promise without any intention of performing it. (c) By its letter and mail both dated February 14, 2011 the award holder accepted that it has sent inferior quality of rice and promised that it will send its inspectors to Bangladesh for joint inspection of the inferior quality of rice sent by it and forwarded the passports of its inspectors for obtaining VISA and agreed that it will accept 90% payment provisionally against their export bill of exchange and that balance 10% will be paid after joint inspection and settlement of claim towards the inferior goods supplied by the award holder. (d) However, as soon as the 90% payment was released by the petitioner, as agreed between the parties, the award holder refused to send its representative for joint inspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of their invoice amounting to US$ 382,348.90 was to be settled after inspection and finalization and by doing so, the award holder procured a purported award for the sum of US$ 382,348.90. (j) The award holder with an intend to deceive the petitioner and to perpetrate fraud on the petitioner deliberately suppressed from the purported Arbitral tribunal that the award holder in its letters dated June 10, 2011 and July 11, 2011 had admitted its liability and agreed to pay demurrage charges on vessel Tu Man Gang to the extent of US$ 20,921,88. The petitioner is unable to disclose other particulars of fraud till disclosure of fuller and better particulars by the award holder. The petitioner craves leave to file a supplementary affidavit upon such disclosure of fuller and better particulars by the award holder. 75. In the premises, the purported award holder was in conflict with the Public Policy of India as the same was induced or affected by fraud and hence enforcement of the purported award holder be refused and/or the same should be held as unenforceable. 76. Without prejudice to the aforesaid and/or in addition thereto, the purported award is not enforceable, interalia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter dated September 22, 2011 from GAFTA appointing one Mr. R. Eikel as arbitrator on behalf of the petitioner in case No.14456 and requested to appoint Arbitrator in Case No.14457. C2. The time to appoint arbitrator by the petitioner was to expire on September 22, 2011. Only after that, the award holder was entitled to make an application to GAFTA to appoint an Arbitrator. Appointment of Mr. R. Eikel by GAFTA on September 22, 2011 without any application by the award holder was irregular and not binding on the petitioner. In any event and as the award holder by its letter dated September 19, 2011 wanted the petitioner to appoint its Arbitrator within 3 days therefrom and as in computing the 3 days period the date of issuance being September 19, 2011 was to be excluded, no appointment of any Arbitrator, either of Mr. R. Eikel or otherwise, could not be made by GAFTA on September 22, 2011 and such alleged appointment is bad being contrary to the agreement between the parties and is not and cannot be binding on the petitioner. C3. Since the Arbitrator on behalf of the petitioner was not appointed in accordance with the procedure agreed, the composition of the arbitral tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner was not given proper notice of the arbitral proceedings. The petitioner was unable to present its case. In the premises, the purported award is not enforceable. F1. From the mail of GAFTA dated September 26, 2012, it is clear that GAFTA can only accept hardcopies towards pleadings. From the mail dated September 25, 2012 of GAFTA, it appears that hardcopy of the claim submission was filed by the award holder on September 24, 2012, though the time limit was September 19, 2012. F2. In the premises, the arbitral procedure was not in accordance with the law applicable and enforcement of the purported award should be refused. G1. A Civil suit being C.S. No.185 of 2011 filed by the petitioner against the award holder challenging the purported notices both dated July 28, 2011 referring the alleged disputes to Arbitration and appointment of Arbitrator is pending disposal. In the said suit an order dated September 9, 2011 was passed by an Hon'ble Single Judge directing that any action taken by the parties to the suit shall be subject to and abide by the result of the suit. The said order was upheld by the Hon'ble Division Bench dismissing the Cross Objection by the Award holder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /materials before the Arbitral Tribunal and more particularly, because the subsequent correspondence between the parties disclosed very clearly that the respondent had categorically denied its obligation to produce any quality inspection report at the Port of destination. It also noted that the Arbitral Tribunal had jurisdiction to decide the issue one way or the other and in the present case, it had so decided. The High Court also noted that the petitioner had not alleged any fraud or bias against the Arbitral Tribunal as such. From the grievance of the petitioner, even if taken at its face value, it did not warrant interference under Section 48 of the Act. In substance, the learned Single Judge after adverting to the settled legal position and the factual matrix of the case on hand, concluded that the objections of the petitioner, regarding enforceability of the subject foreign award, were devoid of merit and thus rejected the same. 9. Aggrieved, the petitioner has once again approached this Court by way of the instant special leave petitions, broadly reiterating the objections taken before the High Court. In that, the subject foreign awards are vitiated by fraud; the awards are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do in law. For this reason alone, contends the respondent, no indulgence should be shown to the petitioner. 11. On merits, it is submitted that the grounds urged by the petitioner would not come within the purview of Section 48 of the Act, which is very narrow and does not require the Court to have a second look at foreign awards. The grounds, at best, could be urged by the petitioner in the appeal to be filed against the foreign award governed by English Laws (UK Arbitration Act, 1996). The petitioner has allowed the said awards to attain finality having failed to file such appeal. Even the argument of fraud on the basis of the allegation that the relevant documents were not brought to the notice of the Arbitral Tribunal by the respondent - award holder, is baseless and only a subterfuge for protracting the recovery of dues. In that, the respondent had produced a swift message dated 3rd June, 2011 sent from the respondent bank to the petitioner bank and the subsequent correspondence between the parties to which reference has been made by the Arbitral Tribunal while deciding the matter. There is no allegation that the respondent concealed the stated correspondence between the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Divan, learned senior counsel appearing for the respondents. 13. We first proceed to examine the preliminary issue as to whether it was open to the petitioner to raise grounds regarding enforceability of the foreign awards despite the judgment of the High Court dated 4th December, 2014, rejecting the objections in the context of maintainability of the execution petition and which decision had attained finality consequent to rejection of the special leave petitions by this Court and including the review petition by the High Court. The petitioner contends that on the earlier occasion, the objections were limited to the questions of maintainability of the execution case on grounds as were urged at the relevant time and not in reference to the enforceability of the subject foreign awards as such. This argument, to say the least, is an attempt to indulge in hair splitting and nothing more. It is an argument in desperation only to protract the execution of the foreign award on untenable grounds. Indeed, the petitioner had not filed any formal application to raise the issue of maintainability of the execution case but the Court had permitted the petitioner to orally urge "all available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of foreign awards. We cannot countenance such a situation keeping in mind the avowed object of the Arbitration and Conciliation Act, 1996, in particular, while dealing with the enforcement of foreign awards. For, the scope of interference has been consciously constricted by the legislature in relation to the execution of foreign awards. Therefore, the subject application filed by the petitioner deserves to be rejected, being barred by constructive res judicata, as has been justly observed by the High Court in the impugned judgment. 15. There is an additional reason which dissuades us to show any indulgence to the petitioner. We find force in the grievance made by the respondent that the conduct of the petitioner is indicative of an attempt to overreach this Court. For, after an interim order was passed in favour of the respondent, permitting withdrawal of part of the deposited amount, the petitioner lost no time in changing the name of the company within three days thereafter on 23rd April, 2018. The petitioner also changed its registered office address on 26th April, 2018 and had no compunction in moving the NCLT, Kolkata on 27th April, 2018 to prevent the respondent from enj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by claimants only. 6.3 As a starting point on the first issue, whether the contractual quality had been delivered by sellers and received by buyers, the tribunal focuses on the provisions of the governing contract and, as far as relevant, to its amendments. 6.4 The contract agreed between the parties was for the sale and purchase of 15000 metric tons of Thai Nonbasmati Parboiled Rice on FOB Bangkok terms. 6.5. The contract provided in his context under the quality clause that: "Rice to be supplied 'Rice to be supplied shall be 15000MT (5 percent more or less) of Non-basmati Parboiled rice 15 percent (Maximum) Broken. Latest Clop of 2009-2010 Thailand origin In good condition, 'fit for human consumption without any unpleasant odour, free from any sign or mould, fermentation or deterioration and free from obnoxious and deleterious matters and poisonous weed seeds. Rice must be free from insect infestation and shall have the following specification". i) Moisture (Maximum): 13 PCT ii) Broken Grains (Maximum): 15 PCT (Rice size of 3/4th and below will be considered as broken and less than 1/4th Broken should not be more than 2 percent iii) Foreign Mater (Maxi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the three vessels was within the amended contractual specifications. 6.12. In addition to the above, the provision DI the Quality Clause 5 of GAFTA Contract No.48, being Tale Quale contract as such, states, Inter alia: "Certificate of Inspection at time o/ 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 01 the shipping documents', inter alia the above PreShipment Certificates as issued by ISC and provided by Sellers, Sellers were duty entitled to trigger payment under the Contract. 6.14 WE THEREFORE FIND THAT Sellers' claim for payment of IJSD 440.00 per metric ton 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 payable after receipt of quality inspection report of destination port". 6.16 This indeed establishes an alteration to the original provision of the Contract that the quality would be final at the port of loading, at least as far as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract not be extended and Buyers therefore planned to "establish Fresh LC for the balance quantity of 2000 ton in the old contract". 6.26 The Tribunal has not seen any new letter of credit for this purpose and as Buyers have not filed such, the Contract came to its end, 6.27 WE THEREFORE FIND THAT Sellers' calculations for sums and interest due should be based on a quantity of 13,729.55 metric tons. 6.28 WE FIND AND DECLARE THAT: 1) Sellers' claim for payment of balance of USD 10.00 per metric ton for each of the three shipments amounting to USD 137,148.20 succeeds. Interest to run from 29th June 2011. The date of Buyers' email stating that they would not be "obliged and/or liable to pay any sum" to Sellers. 2) Sellers' claim for the balance of as deducted from the invoice in reference to the shipment on board of MV Tuman Gang amounting to USD 382,348.90 succeeds. Interest to run from 20th February 2011, the date by which Buyers should have provided a 'quality inspection report at destination port'. Buyers shall pay compound interest on the above sum of USD 137,148.20 at the rate of 4% (four per cent) per annum calculated at quarterly rests, from 29th June 2011 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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