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2004 (6) TMI 635

(for short 1996 Act) to challenge an award dated 21st October, 2003 passed by International Court of Arbitration in Case No. 1107/03.D.K. There are certain alternative prayers but for the purpose of deciding the issue before me it is not necessary to advert to the same. 2. In paras 9 and 10 of petition this is what is stated:- 9. The petitioner submits that the present petition under section 34 of the Act is maintainable against the impugned award because the agreements between the parties are clearly governed by the law of India. The award in question, therefore, is a domestic award and/or an award under Part I of the Act, although made in Geneva under the I.C.C Rules. The law declared by this Hon'ble Court in N.T.P.C and Singer clearly supports the present petition. Recently, the Hon'ble Supreme Court in Bhatia International case has clearly held that Part I of the Act applies to all arbitrations including those made in International Commercial Arbitrations taking place outside India. Part I includes section 34 and, therefore, the present petition is clearly maintainable. It is submitted that courts in India can examine the challenge against the impugned award that is gov .....

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t in Chapters 12 and 10 respectively. Clauses 12.2 and 10.2 are reproduced herein below:- 12.2 All disputes arising in connection with this agreement shall be settled through mutual negotiations. In case no settlement can be reached the case may be submitted to an Arbitration Institute which works in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris. The decision rendered by three (3) Arbitrators appointed in accordance with the said Rules shall be final and binding upon both parties, neither shall seek recourse to a law Court or other authorities for revising the decision. Arbitration shall be held in Geneva, Switzerland and the arbitration fee shall be borne by the losing party. 10.2 All disputes arising in connection with this Agreement shall be settled through mutual negotiations. In case no settlement can be reached the case may be submitted to an Arbitration Institute which works in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris. The decision rendered by the three (3) arbitrators appointed in accordance with the said Rules shall be final and binding upon both .....

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g the Arbitration proceedings. According to him, the award made in Switzerland is a foreign award under section 44 of the Act. Such an award is incapable of being challenged by taking recourse to section 34 of the 1996 Act. Shri Chinoy submits that such an award can only be resisted in its enforcement in India and there is no provision in law by which it could be challenged. Shri Chinoy invited my attention to the provisions of Foreign Award (Recognition and Enforcement) Act, 1961 (Foreign Act) and in particular Section 9(b) thereof. He submits that Section 9(b) of Foreign Act was not consistent with the terms of New York Convention of 1958 and was deleted in 1996 Act. However, Legislature has, while deleting Section 9(b) retained section 9(a) of Foreign Act (Section 51 in the 1996 Act). The deletion of Section 9(b) of Foreign Act is not without any significance. Shri Chinoy contends that under the 1996 Act an award made in the foreign/notified Countiy would be a foreign award irrespective of substantive law governing the contract or the law governing the arbitration agreement. He submits that the petition is filed on the basis that agreement between parties being governed by law o .....

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itions 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 prove that- (a) …. (b) …. (c) …. (d) …. (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. 9. Shri Chinoy was at pains to point out that deletion of section 9(e) from the Foreign Act is something which cannot be brushed aside. He contends that Section 9(b) of Foreign Act and section 44 of 1996 Act read with Article 1(1) of 1958 Conventiondeal with totally different aspect. Section 9(b) treated a class of foreign awards as domestic awards by excluding them from Foreign Act. Latter part of Article 1(1) of 1958 Convention treated class of local/domestic awards as foreign awards by including in from the definition of foreign award. After inviting in attention to the Convention and the provision of Foreign Act, Shri Chinoy contends that now the field is occupied and covered by section 48(1)(e) of the Act which is on par with Article V .....

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imilarly, by the decision of this Court (Deshmukh, J.) in the case of (Jindal Drugs v. Noy Vallesina Engineering, S.P.A, Italy)6, reported in 2002 (3) Bom. C.R (O.O.C.J) 554 : 2002 (2) Mh. L.J 820. Shri Chinoy submits that the decision of the Supreme Court in the case of (Bhatia International v. Bulk Trading S.A)7, J.T 2002 (3) S.C 150 which has been relied upon by petitioner in support of its case has no application to the issue before this Court. Assuming that some observations could be said to have some bearing on the controversy, Shri Chinoy submits that the same would have to be read in the context of issue before the Supreme Court viz., applicability of section 9 of the Act to an International Commercial Arbitration and Arbitration proceedings conducted outside India. He submits that even this judgment of the Supreme Court has been referred to by a Single Judge of this Court in the case of (Force Shipping Limited… v. Ashapura Minechem Limited….)8, reported in 2003 (6) Bom. C.R (O.O.C.J) 328 : 2003 Mh. L.J 329. This Court (Rebello, J.) held that even after the decision in Bhatia International's case, legal position is the same viz., that a foreign award canno .....

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titioner and respondent No. 1 bar assignment without prior consent of petitioner. He submits that respondent No. 1 is facing proceedings under Sick Industrial Companies (Special Provisions) Act, 1985 and before Debt Recovery Tribunal under R.D.B Act, 1993. There is restraint on transfer of moveables. It is on 1st March, 2004 that respondent No. 1 appeared and petition is admitted. 14. Shri Dave contends that on 2nd March, 2004 the aspect of deed of assignment dated 25th November, 2003 is brought to the notice of this Court by annexing the same at Exh. A to the affidavit dated 2nd March, 2004. On 4th March, 2004 a motion is filed. Respondent No. 2 was impleaded. Respondent No. 2 refused service on 23rd March, 2004. Thereafter, this Court orders suspension of Award. 15. Shri Dave submits that the assignment is only with a view to get out of jurisdiction of this Court. A fraud has been perpetrated and the Court should not assist such litigant. In substance, Shri Dave contended that the conduct of respondent No. 1 is such that it is not entitled to raise the issue of maintainability of petition. Consequently, the objection raised on behalf of such a party should not be countenanced and .....

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ngs is nothing but curial law. Shri Dave invites my attention to sections 19 to 22 appearing in this Chapter and contends that there is nothing by which it could be said that provisions such as these do not apply when venue or place of arbitration is outside India. He submits that Chapter VI containing section 28 is entitled making of Arbitral Award and termination of proceedings . Thereafter, Chapter VII appears which is entitled recourse against Arbitral Award . This will have to be read with section 2(c). Shri Dave contends that Part II deals with enforcement of certain foreign awards. Chapter I therein deals with New York convention awards. Shri Dave invites my attention to sections 44, 45, 46 and 48 together with the First Schedule Article I and Article III. He invites my attention to Article V and Article VI. He submits that considering the scheme of the Act, it is clear that Part I thereof applies to all arbitrations outside India. Consequently, any award arising out of such proceedings would be an award which is capable of being challenged in Indian Court by invoking section 34 of the 1996 Act. In order words, such award is nothing but a domestic award. 18. He submits that .....

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n the Single Judges decisions of this Court would not apply. 20. Shri Dave, with equal force contends that the principles culled out from books of eminent persons like Dicey and Morris, Mustill and Boyd would go to show that these are consistent with the approach of Indian Supreme Court i.e applicability of the law governing underlying contract in such matters. 21. For all these reasons, submits Shri Dave that the instant petition is maintainable and be heard on merits. 22. At the outset, it is not possible to accept the contention of Shri Dave that respondent No. 1 is disentitled from raising the issue of maintainability in view of its conduct. It is well settled that if the Court does not have authority or power to take cognisance of such a petition in law, then that issue is an issue of its jurisdiction. Such issues go to the root of the matter. Such issues are accordingly decided on the touch stone of law and not by considering the conduct of party raising them. No general rule can be laid down and the matter is to be considered on the facts of each case. The conduct may be or may not be blameworthy or reprehensible but ultimately if the Court does not have jurisdiction and pro .....

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onvention applies. 24. Section 44, therefore, in clearest terms states that an Arbitral Award on differences between persons arising out of legal relationship, whether contractual or not considered as commercial under law in force in India, made on or after 11th October, 1960 in pursuance of agreement in writing for arbitration to which the convention set forth in the First Schedule applies and in one of such territories as the Central Government declares to be the territory to which convention applies is a foreign award. Thus, foreign award is an Arbitral Award. It is an Arbitral Award on differences between parties arising out of legal relationship which may be contractual or not but it should be considered as commercial under the law in force in India. It is, therefore, clear that, concept of foreign award as defined in section 44 which appears in Part II cannot be ignored while considering the present controversy. Both sides do not dispute before me that the award is foreign award. 25. Section 45 of the 1996 Act opens with a non obstante clause which overrides what is contained in Part I of the 1996 Act or C.P.C The moment Judicial Authority when seized of an action in a matter .....

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other Indian laws but when a foreign award which is made in arbitral proceedings outside India, arising out of an agreement subjected to Indian laws exclusively, then, it will not be open to challenge at all. According to him the legislature has not intended such a conflict. In other words, arbitration agreement and be challenged but not the Arbitral Award. To my mind, this submission overlooks a fundamental aspect namely that legislature has provided only remedy of resistance of enforceability of both under the 1996 Act. It will not be a proper reading of sections 45 and 48 if a challenge is held to be contemplated by section 45 qua a arbitration agreement. The Judicial Authority will refuse to enforce the arbitration agreement. 27. Shri Dave submits that section 48 will have to be read together with sections 44, 45, 46, and 47 as well as other provisions in Part II Chapter I and cannot be read in isolation, Shri Chinoy submits that whichever way one reads it, a foreign award cannot be challenged in India but its enforceability only can be resisted here. In the context of these submission, the matter will have to be examined. 28. In the case of Bhatia International (supra), the S .....

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on 17. As indicated earlier, Mr. Sen had submitted that this indicated the intention of the legislature not to apply sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all chapters or parts. The general provisions will apply to all chapters or parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate chapter or part. Part II deals with enforcement of foreign awards. Thus section 44 (in chapter I) and section 53 (in Chapter II) define foreign awards, as being awards covered by arbitration under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of foreign awards which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an Arbitral Award and separate provisions for enforcement of foreign awards the provisions in Part I dealing with these aspects will not apply to such foreign .....

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challenged. He submits that a foreign award can be challenged when it is sought to be enforced or executed. It must also be permitted to be challenged before such a stage in India if its subject-matter is governed by Indian laws. He submits that if this is not the position, the Supreme Court in the case of Bhatia International would never have permitted an application under section 9 to be entertained by Indian Court at the instance of a foreign party and that too in an International Commercial Arbitration held outside India. The emphases of Shri Dave is that the decisions of this Court not properly and correctly appreciation as also applying the principles laid down by the Supreme Court, they do not have any binding force and effect. 30. It is not possible for me to accept the contentions of Shri Dave. Firstly, an interpretation and equally a misinterpretation of Supreme Court decision in a judgement of co-ordinate Court is biding upon me. In the instant case, there is not one but three decisions in the field. The last of the decision is after the judgements of Supreme Court in Bhatia International's case. This Court (Rebello, J.) after noticing the judgement of the Supreme Co .....

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ment of parties. But if not so excluded; the provisions of Part I will also apply to foreign awards (emphasis supplied). From the portion reproduced above, it is clear that the law on the subject may be summarised thus:- (a) When there are general provisions under the statute unless statute expressly states that they are not to apply then in that event, the general provisions would apply; (b) When the statute provides special provisions for enforcement it is the special provisions which would apply and not the general provisions. In the instant case there are special provisions for enforcement of foreign awards. Once therefore, there are special provisions for enforcement of foreign awards then the general provisions including provisions for challenge to the award considering the special provision would be excluded. That would mean application of Part II, once that be so, Part I would not apply. Under Part I a decree can be executed only if the challenge under section 34 fails if made. Under section 48, the foreign awards become enforceable and is to be executed as a decree. (c) On the consideration of the law set out in paragraph 28 in so far as application of section 9 is conside .....

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d. The expression proper law refers to the substantive principles of the domestic law of the chosen system. The Supreme Court, in its judgment in the case of National Thermal Power Corporation referred to above, has observed thus:- 24. The validity, effect and interpretation of the arbitration agreement are governed by its proper law. Such law will decide whether the arbitration clause is wide enough to cover the dispute between the parties. Such law will also ordinarily decide whether the arbitration clause binds the parties even when one of them alleges that the contract is mid, or voidable or illegal or that such contract has been discharged by breach or frustration. (See Heyman v. Darwins Ltd.). The proper law of arbitration will also decide whether the arbitration clause would equally apply to a different contract between the same parties or between one of those parties and third party. 26. Whereas, as stated above, the proper law of arbitration (i.e, the substantive law governing arbitration) determines the validity, effect and interpretation of the arbitration agreement, the arbitration proceedings are conducted, in the absence of any agreement to the contrary, in accordance .....

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reement are the competent courts in respect of all matter arising under the Arbitration agreement which will include validity of the Award made by the arbitrators. In the case of National Thermal Power Corporation referred to above, the Supreme Court after considering the provision of the Arbitration Act, 1940held that, though the award was made at London, it had to be filed in Indian Court, because the proper law was the laws in force in India. Now the Arbitration Act 1940 has been repealed. In the present case also, the proper law is the laws in force in India and the award has been made in London. The present petition has been filed under section 34 of the Act challenging the award. The question, therefore, that falls for consideration is whether, the award, which has been made at London, can be challenged by filing an application under section 34 of the Act. Sub-section (2) of section 2, which is relevant for considering the question, reads as under:- 2(2) This part shall apply where the place of arbitration is in India . 8. As observed above, the present petition has been filed by the petitioner under the provisions of section 34 of the Arbitration Act. Perusal of the Scheme o .....

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is no doubt true that as per the law laid down by the Supreme Court in its judgment in the case of National Thermal Power Corporation, the petitioner can challenge the validity of the award under the substantive law in force in India. Perusal of the provisions of section 48(1)(e) and section 48(3) of the Act, shows that, the Act contemplates the possibility of a foreign award which is sought to be enforced under section 48 of the Act being challenged before a competent authority of the country under the law of which that award was made. It is obvious, that such an award can be challenged under the substantive law in force in India. However, whether, there is a substantive law in force in India which permits or provides for challenge to such an award is another question. It is clear, that, the petitioner would be able to challenge the award under the substantive law in force in India, provided, the substantive law in force in India provides for such a challenge. The question, whether such a law is in force in India or not or under which law in force in India, the petitioner can challenge the ward is neither raised nor does it fall for consideration before me in the present petition. .....

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rounds set out in section 48 of the Act. The grounds on which a party can challenge an award are detailed in section 34(2) of the Act. A comparison of the provision of section 48 and section 34 of the Act quoted above 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. Thus, as and when enforcement of the 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 the Act. Therefore, it cannot be said that the petitioner has no remedy of challenging the award. It is a settled principle of law that in construing statutes one has to adhere to the ordinary meaning of the words used and to the grammatical construction unless that is at variance with the intention of the legislature to be collected from the scheme of the statute itself or leads to any manifest absurdity or repugnancy. It appears from the reading of the Act that in so far as the challenge and enforcibility is concerned, there are different schemes for a domestic award and a foreign award. The Act provides for .....

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can be resisted are identical. Thus, though the scheme of the Act provides different kind of remedies to the persons aggrieved by a domestic award and a person aggrieved by a foreign award, both the remedies are equally efficacious and adequate, it cannot be said that the Act does not provide an effective remedy to a person who is aggrieved by a foreign award. Hence, there is, in my opinion, no need to construe the provision of section 2(2) of the Act in any other manner. 33. With respect, this enunciation is in tune with the legislative mandate and I am in agreement with it. Similar are the observations of Justice Nijjar, to which my attention has been invited by Shri Chinoy. Judicial discipline and principles of certainty require that co-ordinate benches ought not to differ with each other, merely because a different argument or another interpretation of law is placed before. Exception to this could only be if the decisions are per incuriam. The binding effect of a decision of co-ordinate Court is not lost merely because it did not consider or did not notice any aspect or principle of law unless it could be demonstrated that the decision is rendered per incuriam. Per incuriam is .....

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per incuriam merely because the Court had not the benefit of a full and exhaustive argument and as a general rule the only cases in which decisions should be held to be given as per incuriam are those given in ignorance of some inconsistent statutory provision or binding authorities. In the matter before us, it cannot be said that the Division Bench in Kalavati's case C.A No. 1699 of 1969, dt. 26-4-1973 (Bom.) has given its decision either in ignorance of the provisions of any statute or binding authorities i.e the judgment of the Supreme Court. It was however, contended that the Division Bench in Kalavati's case C.A No. 1699 of 1969, dt. 26-4-1973 (Bom.) had wrongly understood (Sabharwal Brothers v. Guna Amrit Thadani)13, (1973) 3 SCC 750 : A.I.R 1972 S.C 1893 and thereby erroneously came to the conclusion that the decision in (Satpalsingh Arom's case)14, 1971 (73) Bom. L.R 777 which was binding, being a decision of a Division Bench of the Bombay High Court, was no longer good law. But then, it is equally well settled that an interpretation (and equally a misinterpretation) of a binding decision of the Supreme Court will itself be binding subsequently on co-ordinate c .....

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ading of the Supreme Court decision. In the case of (Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court)17, reported in (1990) 3 SCC 682 reliance on which is placed by Shri Dave, the Supreme Court in para 44 has observed thus: 44. An analysis of judicial precedent, ratio decidendi and the ambit of earlier ad later decisions is to be found in the House of Lords' decision in F.A & A.B Ltd. v. Lupton (Inspector of Taxes) Lord Simon concerned with the decisions in Griffiths v. J.P Harison Watford Ltd. and Finsbury Securities Ltd. v. Inland Revenue Commissioner with their interrelationship and with the question whether Lupton case fell within the precedent established by the one or the other case, said (A.C p. 658) ….. What constitutes binding precedent is the ratio decidendi of a case, and this is almost always to be ascertained by an analysis of the material facts of the case-that is, generally, those facts which the Tribunal whose decision is in question itself holds, expressly or implicitly, to be material. 37. Similarly in the case of (Fuzlaunbi v. K. Khader Vali)18, reported in (1980) 4 SCC 125, the Supreme Court has held:- W .....

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be utter confusion. The position would be equally bad where a Judge sitting singly in the High Court is of opinion that the previous decision of another single Judge on a question of law is wrong and given effect to that view instead of referring the matter to a larger Bench. In such a case lawyers would not know-how to advise their clients and all courts subordinate to the High Court would find themselves in an embarrassing position of having to choose between dissentient judgments of their own High Court. 39. Hence I conclude that the decisions of this Court (Deshmukh, J. & Rebello, J.) are binding on me. That apart, for reasons set out above, I respectfully concur with the same. It is also brought to my notice that letters patent appeals are pending against these judgments. However, they are not set aside and hence continue to hold the field. In these decisions, identical objections have been upheld. Therefore, I am bound by them. After holding that I am bound by them, naturally, I have to hold that present petition filed under section 34 of the 1996 Act challenging a foreign award is not maintainable. 40. Considering the conclusion reached by me, it is not necessary to dec .....

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