TMI Blog2012 (7) TMI 1098X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Justice J.K. Mehra (Retd.), is unenforceable against the petitioners. A declaration is also sought that the demand letter dated 22.08.2005, for ₹ 1,24,427,492/- issued by respondent No. 1 is unenforceable against the petitioners. The petitioners also seek stay of the operation of the aforesaid partial award dated 31.03.2005, and of the aforesaid demand letter dated 22.08.2005. 2. The petitioner Nos. 1 and 2 in O.M.P. No. 223/2006 are Public sector Companies, engaged in the business of purchase of crude oil for the purpose of refining and selling the refined petroleum products. 3. Respondent No. 1, i.e. M/s Videocon Industries Ltd. (in both the Petitions- which is also the contesting Respondent), is a company incorporated in India and engaged in business of, amongst others, exploration and exploitation of hydrocarbons. 4. The case of the petitioners is that the Government of India, being the sole owner of natural resources, entered into a Production Sharing Contract (PSC) dated 28.10.1994 with ONGC, Videocon Petroleum Ltd., Command Petroleum (India) Ltd. (now known as Cairn Energy), and Ravva Oil (Singapore) Ltd., collectively referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s governed by the Part-II of the Act. 13. It is submitted that in contrast to Section 34 of the Act, Section 48 does not provide for or permit a challenge to a foreign award in Courts in India. A party can only resist the enforcement of a Foreign Award, as and when it is sought to be enforced. The Respondent submits that no Petition under Section 48 can be filed, unless the person who has succeeded in the arbitration seeks enforcement of the Award. It is at that point of time that the successful party may be said to have 'invoked' an award against the unsuccessful party, and it is that invocation of an Award that gives rise to a cause of action for filing an application under Section 48 of the Act. It is argued that the respondents No. 1 2 have not yet invoked the partial award dated 31.03.2005. Consequently, this petition under Section 48 is not maintainable. 14. Before I proceed to further record and discuss the respective submissions of the parties, I consider it appropriate to take note of the relevant provisions of the Act. Section 46 of the Act states: 46. When foreign award binding. - Any foreign award which would be enforceable under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of 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), it is hereby declared, for the avoidance of any doubt, that an aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The respondents submit that Section 46 of the Act begins with the words Any foreign award which would be enforceable under this chapter... ... .... . Consequently, the application of Section 46 is limited to circumstances where an Award has been held to be enforceable under Part II of the Act. 20. It is further submitted that the question of when a Foreign Award is considered to be enforceable under the Act has been addressed in Section 49 of the Act which states that where the Court is satisfied that the Foreign Award is enforceable under this Chapter, the Award shall deemed to be a decree of that Court . 21. Therefore: (a) The decision - whether an Award is enforceable or not, is entirely within the Court's domain; b) It is only upon such satisfaction being reached by the Court, that a Foreign Award is enforceable; c) In order to attain such satisfaction, the Foreign Award must go through the process envisaged under this chapter i.e. Chapter I of Part II, which includes Sections 44 to 52,at the end of which, the Court must be satisfied that the Award is enforceable. 22. It is argued that where a Foreign Award is enfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature to provide a party with a right to challenge a foreign award only in certain circumstances. By necessary implication it excludes the right of a party to challenge a foreign award except in cases where the enforcement thereof is sought. (emphasis supplied) (iii) Jindal Drugs Ltd. v. Noy Vallesina Engineering SpA and others, 2002 (2) Arb L.R. 323 (Bombay), wherein the Court observed: 8. Insofar as the challenge to a foreign Award is concerned the scheme of the Act appears to be that, the remedy that is available to a person against whom that Award has been made is to wait till the person in whose favour the Award is made moves under Section 48 of the Act for enforcement of the award and it is then that such a person can challenge the validity of the Award on the grounds which are mentioned in Section 48 of the Act. (emphasis supplied) (iv) Vikrant Tyres Ltd. and Anr. v. Techno Export Foreign Trade Company Ltd. 2005 (Supp) Arb. LR 454 (Karnataka), wherein the Court observed: 41 .... However from the scheme of Section 48 it could be said that no application as a pre-emptive step could be filed to resist execution even before any such appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the latter to the former, towards the debt. Order XXI Rule 2 of the CPC also recognizes the discharge of debt by appropriation or adjustment of amount already lying with the decree holder. 30. Therefore, to read section 48 in a manner to say that enforcement can be refused only at the request of the party against whom enforcement/execution proceedings have been initiated in a Court, would be to add/supply words to the said provision. 31. Meaning of invoke is appeal to as an authority or in support of an argument (Oxford Tenth Ed.) and enforce means compel compliance with (a law, rule or obligation); cause to happen by necessity or force . 32. Thus the use of the word 'invoke' in section 48 in contradistinction to enforce shows that the Legislature did not intend the initiation of an enforcement/execution proceeding as a condition precedent for raising the issue of non-enforceability of a foreign award by the unsuccessful party. 33. Further, the term enforcement of award has been held not to mean merely execution of that award as a decree, but it also includes using that award as defence in legal proceedings for claiming set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on urged on behalf of the appellant that only a prima facie finding is required to be given on a combined reading of Sections 45, 48 and 50 from which it can be culled out that a party who has suffered an award can always challenge the same under Section 48 on the ground that the arbitration agreement is null and void. This read in conjunction with the right of appeal given under Section 50 and the power of the arbitrator to rule on his own jurisdiction clearly shows the intent of the legislature to avoid delay which would be inevitable if it has to be a final decision and it would defeat the object of soon placing all material before the Arbitral Tribunal. I am afraid that this cannot be accepted as the real purpose of Section 48 is to ensure that at some stage Whether pre-award, post-award or both, a judicial authority must decide the, validity, operation, capability of performance of the arbitration agreement.... (emphasis supplied) 38. Reliance is also placed on Venture Global Engineering Vs. Satyam Computers, 2007 (3) RAJ. 128 (AP), wherein it was held that : A conjoint reading of section 36 and 34 reveal that Section 36 deals with the enforcement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 22.08.2005 the award was sought to be enforced (invoked), and the remedy is provided in section 48 of the Arbitration Act, 1996 therefore, the only remedy available to the petitioners is to file an application under Section 48. Discussion: 42. Part II of the Act is titled Enforcement of Certain Foreign Awards‟. Chapter I (Section 44 to 52) of Part II deals with New York Convention awards‟. Section 44 defines foreign award‟, under Chapter I of Part II of the Act, as an arbitral award made in pursuance of an arbitration agreement as provided for in clause (a) of Section 44, and in such territory as provided for in clause (b) of Section 44. Section 45 provides for the Power of judicial authority to refer parties to arbitration‟ in respect of an arbitration agreement referred to in Section 44. Section 46 to Section 49 deal with Enforcement of the foreign awards under Chapter I of Part II of the Act. 43. The first part of Section 46 provides for the effect of a foreign award which would be enforceable under chapter I- by stating that the same shall be binding for all purposes on the persons as between whom it was made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings in respect of the subject matter forming part of a foreign award. However, such an action/proceedings may at the behest of the opposite party be short circuited, if launched before the making of an arbitral award - by resort to Section 45. If a foreign award has already been rendered, the opposite party would be entitled to enforce the award, inter alia, by relying upon the same by way of a defence, set off or otherwise, by following the procedure prescribed under Section 47 of the Act. Such enforcement may then be opposed by the plaintiff/award debtor by producing evidence under Section 48 of the Act. 45. Chapter I of Part II the Act deals, firstly, with the definition of foreign awards‟; secondly, with the power of the judicial authority to refer the parties to arbitration, and; thirdly, with the enforcement of foreign awards. 46. A comparative analysis of the provisions of Part I and Part II of the Act reveals that request for refusal of enforcement of an award as provided for in Section 48, cannot be equated to, and is different from, an independent remedy for seeking recourse against an award (as provided for in Section 34). Firstly, Chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutory interpretation. 48. A careful perusal of Section 48 itself would reveal that an application to assail a foreign award i.e. to seek setting aside or suspension of the foreign award, is independent of the said provision. Section 48 (1)(e) provides that enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if the party furnishes proof that - 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 the under the law of which, that award was made . Further, Section 48(3) states that 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 sub-section (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. Therefore, Section 48 in itself contemplates the initiation of independent proceedings for assailing the foreign award before the competent Court/authority of the country where the awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s execution. The present case concerns the Act which has a different legislative scheme altogether. Moreover, I find myself in respectful disagreement with the view of the Calcutta High Court that enforcement would include the whole process of getting the award. There is no question of the process of getting an award being considered as a process of enforcement . Enforcement is of an award. It is not the enforcement of legal rights that was being discussed in Section 7(i) of the Arbitration (Protocol and Convention) Act, 1937. Unless the award comes into being, I fail to understand where is the question of its enforcement. The said decision of the Calcutta High Court, therefore, is of no avail to the petitioner. 52. The decision in Centrotrade Minerals and Metals (supra) of the Calcutta High Court, with respect, does not lay down the correct legal proposition in my view in so far as it holds at the same time the person against whom the foreign award has gone could approach the Court for setting aside such an award . I see no reason to disagree with the view taken by a co-ordinate Bench of this Court in Bulk Trading SA (supra), the Bombay High Court in Jindal Drugs Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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