TMI Blog2021 (8) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... As a matter of fact, Section 47(1)(c) speaks of only evidence as may be necessary to prove that the award is a foreign award. Section 47(1)(c) would apply to adduce evidence as to whether the arbitration agreement is a New York Convention agreement. Also, the requisite Central Government notification can be produced under Section 47(1)(c), so that Section 44(b) gets satisfied. To argue that the burden of proof is on the person enforcing the award and that this burden can only be discharged by such person leading evidence to affirmatively show that a non-signatory to an arbitration agreement can be bound by a foreign award is outside Section 47(1)(c). This argument consequently stands dismissed. The appellants then pressed Section 48(1)(c) into operation. As can be seen, Section 48(1)(c) relates to an award which 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 submissions to arbitration - the proviso to Section 48(1)(c) states that an award may be partially enforced, provided that matters which are outside the submission to arbitration can be segregated, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration Act, 1996 ] which provisions deal inter alia with recognition and enforcement of foreign awards. The facts necessary to appreciate the points raised in these appeals are as follows. 2. On 18th September, 2000, a representation agreement was entered into between Integrated Sales Services Ltd. [ ISS / Respondent No. 1], a company based in Hong Kong and DMC Management Consultants Ltd. [ DMC ], a company registered in India, whose principal business address is at Nagpur. By this agreement, ISS was to assist DMC to sell its goods and services to prospective customers, and in consideration thereof was to receive commission. The relevant clauses of the agreement are clauses 2 and 3 which read as follows: - 2. Duties of Representative Representative shall assist Company with its efforts to sell its Goods and Services to prospective customers. Secondly, where acceptable to the Company, identify potential sources of investment and Investors, and assist Company in negotiating the terms of purchase, sale and/or investment. 3. Validity The right of representation under this Agreement is not limited by time. Compensation is due Representative as defined unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. We are concerned, with sub-clause (4) of this amendment, which reads as follows: - 4. In modification of clause 8(d)(1) of the Agreement, this Agreement is subject to the laws of the State of Delaware, U.S.A., and shall survive the expiration of any other clauses in this Amendment. 5. Disputes arose between the parties, as a result of which a notice for arbitration dated 22nd June, 2009 was sent by ISS to Arun Dev Upadhyaya. Ultimately, a statement of claim dated 22nd June, 2009, was filed before the learned Arbitrator naming Arun Dev Upadhyaya, DMC (India), DMC Global (company registered in Mauritius), Gemini Bay Consulting Limited (company registered in the British Virgin Islands) and Gemini Bay Transcription Private Limited [ GBT / Appellant in CA No. 8343-8344/2018] as respondents. The statement of claim alleged as follows: - 6. DMC Management Consultants, through the Chairman (Upadhyaya) and/or with his family, in turn owns or controls all the stock of DMC Global, which has assumed the obligations of DMC Management Consultants under the agreement referred to below, including the agreement for arbitration; and the Chairman controls and dominates the activities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproximately 4 trips per year, for business and personal reasons. 17. Those trips have included at least four trips to Kansas City, Missouri, to conduct business with ISS representative Terry Peteete, regarding the subject matter of this arbitration. Therefore, he has purposely availed himself of this jurisdiction, and requiring his participation in this arbitration in Kansas City, Missouri does not offend traditional or constitutional notions of justice arid fair play. xxx xxx xxx 30. From September 18, 2000, until approximately June 30, 2008, the relationship among the parties proceeded agreeably. ISS performed its obligations, and upon information and belief, both DMC Management Consultants and DMC Global performed their obligations. xxx xxx xxx 38. On July 22, 2008, DMC Management Consultants gave notice by email entitled Contract Termination Notice, to the two PC Customers, MedQuist and Assistmed, of its intention to terminate the Customer contracts 90 days later. (Note that the Customer Contract with MedQuist had been signed by DMC Global, but was terminated by DMC Management Consultants). DMC Management Consultants requested the Customers b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is approximately $100,000 per month. 65. Upon information and belief, the amount of lost commissions, past, present and reasonably certain to occur in the future, are determined at a rate of $100,000 per month for the period of 48 months following the termination date of October 22, 2008, aggregates $4.8 million due and to become due to ISS from Respondents due to their breach of contract. 7. It was then averred: 74. By making its claims pursuant to the Representation Agreement and the corporate law of Delaware in this arbitration, Claimant ISS is not making, and hereby specifically reserves: (i) all claims which may arise in the future, under the Representation Agreement, for commissions which may become payable in a manner other than as described above, and (ii) all claims for any additional right, title, interest and other matters ISS may make at another time or in another forum against any of these Respondents based in tort, fraud, abusive conduct, or any other wrongful conduct under the law of any of the United States. India. Mauritius, or any other jurisdiction, whether for equitable relief, compensatory damages, punitive or exemplary damages, moral damages, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S and DMC filed briefs. DMC's brief addressed only the issue of applicable law and in spite of the arbitrator s numerous warnings, other Respondents and non-signatory parties failed to file relevant briefs on the matters and submitted affidavits. 11. Issues 1 and 2 were answered stating that Delaware law is the substantive law which controls the agreement and its interpretation and that, since neither the claimant nor the respondent challenged the validity of the agreement or the validity of the arbitration clause, the Arbitrator has jurisdiction to decide whether a non-signatory to the representation agreement can be bound by the award. The other two issues were stated to require an in-depth review and analysis of factual, testimonial and documentary evidence as a result of which the decision on these two issues was postponed . 12. The learned Arbitrator in his final award dated 28th March, 2010, set out the issues that were to be adjudicated as follows: - I THE UNDERSIGNED ARBITRATOR, Alain Frecon, (the tribunal ) having been designated in accordance with the arbitration agreement entered into by ISS and DMC Management Consultants Limited, dated September 18 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jority owned business) and his minority shareholding did not prevent him from running the business as he deemed fit (we received for example no evidence whatsoever that Mr. Upadhyaya's decisions were ever reviewed/challenged nor even questioned by the board of directors of DMC). Whatever Mr. Upadhyaya decided, whether in coordination with, or with the cooperation of Mr. Pathak and the Board of DMC, that is what DMC would do, and the board always voted in line with Mr. Upadhyaya's recommendations. He was as a result, the sole decision maker. The total control and domination of MC by Mr. Upadhyaya is therefore not questionable, in spite of his minority shareholding. The correlation existing between DMC and Gemini Bay is also, not the result of mere coincidence. Not only did the very existence of Gemini Bay germinate within the confines of DMC (but for Mr. Pathak's position as Managing Director of DMC, he would have never known about Medquist or AssistMed), but both companies shared (even if ever so temporarily) the same employees, address, telephone numbers, e-mail addresses, SVPs, customers (primarily Medquist and AssistMed), and shared almost identical contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Agreement for any reason . 15. Under the head Did DMC/Gemini Bay try to avoid/eliminate the payment of such commissions to ISS? , the oral and documentary evidence was referred to as follows: In this respect, Ms. Parker best summarized the situation in her testimony (See Parker's/deposition at p 16 lines 7 through 16). Her statement at page 18 (lines II through 25) further demonstrates the purpose and intent of DMC'S decision to abandon the medical transcription business, for the benefit of Gemini Bay minus the payment of commissions to ISS. Her statement was even acknowledged by Mr. Pathak himself when she asked him if the purpose of DMC's termination was to cut out the Peteetes (ISS) he responded. In essence that's what it does . (See Parker's deposition at pages 19 lines 18 through 20). Even though we agree with Respondents that DMC had no obligation to remain in the medical transcription business, it could only do so by respecting the terms of the Representation Agreement by making sure that the compensation for existing or potential customers identified by the Representative, shall continue according to the Payment Clause (See Claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no independent expert could have possibly reached a reliable and non-speculative opinion, Under such circumstances, Mr. Peteete's intimate understanding of the business was the only and best available option afforded to Claimant. In the absence of such reliable documentary evidence, Claimant cannot be penalized for attempting 'to prove damages the best way possible under the circumstances. Since Delaware law accepts the submission of damage testimony by lay opinion so must this tribunal. The conduct of Respondents gives us no other alternative but to conclude that damages should be computed as Claimant proposes. In essence, Respondents brought this result upon themselves. Claimant's request for damages focuses on the commissions due for finding Medquist and AssistMed and for no other reason (Claimant does not claim any damage for its efforts for trying to find an investor). We find that claim reasonable. We must not however assume that the Gemini Bay/Medquist/AssistMed Agreements would have, could have, lasted any specific amount of time in the future and we must determine the most reasonable period of duration. There is no guarantee that either the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and three dollars ($63,903.00), representing that portion of said fees and expenses (including the Arbitrator's fees and expenses) previously incurred by Claimant. 4. Since the arbitration clause did not provide for the award of attorneys' fees, Claimant and Respondents shall be responsible for their own attorneys' fees, costs and expenses. 5. As ordered by this tribunal, all the costs and expenses of the video conference call held on Friday, March 5, 2010 shall be borne exclusively by Respondents but Claimant shall be responsible for the costs and expenses of its attorneys present during that call. 6. This award is in full settlement of all claims and counterclaims submitted to this Arbitration. Any claim or counterclaim not specifically awarded is hereby denied. 18. To enforce the aforesaid Award, the Respondent first knocked at the doors of the Principal District Judge, Nagpur, but given the fact that, being a foreign award, a District Judge would have no jurisdiction to enforce the same, a learned Single Judge of the High Court of Judicature at Bombay, Nagpur Bench, was then approached. By his judgment dated 18th April, 2016, the learned Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order would be maintainable (See judgment dated 23rd June, 2016 of the Bombay HC in Arb Appeal No. 3/2015). Vide judgment dated 30th September, 2016 in Civil Appeal No. 8475- 76/2016, this Court, after hearing the parties, then ordered that such appeal would be maintainable but only under Section 50 of the Arbitration Act, 1996. 22. The Division Bench of the High Court, after stating the facts and after observing that the foreign award in this case had not been challenged in the USA, then held that the award could only be challenged under Section 48 if the Delaware law has not been followed on the alter ego principle. Being satisfied that the Arbitrator had properly applied the Delaware law on the facts of this case, the Court held that none of the grounds contained in Section 48 would apply so as to resist enforcement of the foreign award in this case. The Division Bench then held that Section 48 required that the grounds that are pressed to resist enforcement must be proved . The Division Bench held that proof is of a higher order than mere evidence being adduced and then held that the appellants have miserably failed to prove that any of the grounds contained in Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the non-examination of these two clients would also vitiate the Award. He cited a number of judgments to buttress these submissions. 25. Shri Vishwanathan also argued that damages were awarded without actual loss having been proved before the learned Arbitrator contrary to the judgment of the Delhi High Court in Agritrade International (P) Ltd. v. National Agricultural Coop. Mktg. Federation of India Ltd., 2012 SCC OnLine Del 896, as a result of which the Award stood vitiated on this ground also. 26. Shri Harish Salve, learned Senior Advocate appearing on behalf of Arun Dev Upadhyaya, argued that the commission of a tort would be outside contractual disputes that arise under the Arbitration Agreement and that since the cause of action really arose in tort, the Award was vitiated on this ground. He also argued relying heavily upon Dallah Real Estate and Tourism Co v Ministry of Religious Affairs of the Government of Pakistan [2010] 3 WLR 1472 [ Dallah ] that a full review based on oral and/or documentary evidence ought to have been undertaken which was not done on the facts of this case, the Division Bench merely echoing the Arbitrator s findings. He then made a distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. xxx xxx xxx 46. When foreign award binding.- Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 47. Evidence.- (1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court- (a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) the original agreement for arbitration or a duly certified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain not defined in the Arbitration Act, means a relationship which gives rise to legal obligations and duties and, therefore, confers a right. 31. Also, the award may deal with differences arising out of breach of contract or tort. 32. Likewise, what is considered to be commercial under the law of India is well explained in the UNCITRAL Model Law as follows: - The term 'commercial' should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring, leasing, construction of works; consulting, engineering, licensing investment, financing: banking; insurance; exploitation agreement or concession, joint venture and other forms of industrial or business co-operation; carriage of goods or passengers by air, sea, rail, or road. 33. In R.M. Investment and Trading Co. (P) Ltd. v. Boeing Co., (1994) 4 SCC 541, at page 546, this court held: 12. [i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk Convention has this to say: Under the convention, it is clear that national arbitration legislation is not permitted to impose more demanding requirements of proof of the existence of a foreign or nondomestic award than those contained in Article IV; Article IV prescribes a maximum standard of proof of an award and Contracting States may not impose stricter or more onerous requirements of proof. xxx xxx xxx Article IV was drafted in order to advance the Convention s general pro-enforcement policies. As one national court put it: Article IV must be interpreted in accordance with the spirit of the Convention The Contracting States wished to reduce the obligation for the party seeking recognition and enforcement of a foreign arbitral award as much as possible. [Judgment of 15 April 1999, XXVI Y.B. Comm. Arb. 863, 866 (Geneva Cour de justice) (2001)] Consistent with this objective, national courts have generally rejected efforts to complicate the proof requirements under Article IV, taking a practical and relatively flexible approach towards proof requirements. (at pages 3396-3397) 37. From this, is clear that all the requirements of sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1) or sub-section (2) of Section 48. Since some arguments were made as to the expression proof contained in Section 48(1), it is necessary to deal with the same. In Emkay Global Financial Services Ltd. v. Girdhar Sondhi, (2018) 9 SCC 49, a question arose under the pari materia provision contained in Section 34 of the Arbitration Act, 1996 as to what the expression proof means therein. After referring to a number of High Court judgments, and to an amendment that has now been made to Section 34, in which the expression furnishes proof that is now substituted by establishes on the basis of the record of the arbitral tribunal that , this judgment held that the expression proof cannot possibly mean the taking of oral evidence as it will otherwise defeat the object of speedy disposal of Section 34 petitions. This was so stated as follows: 21. It will thus be seen that speedy resolution of arbitral disputes has been the reason for enacting the 1996 Act, and continues to be the reason for adding amendments to the said Act to strengthen the aforesaid object. Quite obviously, if issues are to be framed and oral evidence taken in a summary proceeding under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gic would apply to Section 48, as a result of which the expression proof in Section 48 would only mean established on the basis of the record of the arbitral tribunal and such other matters as are relevant to the grounds contained in Section 48. 40. It is important to remember that the New York Convention, which our Act has adopted, has a pro-enforcement bias, and unless a party is able to show that it s case comes clearly within Sections 48(1) or 48(2), the foreign award must be enforced. Also, the grounds contained in Sections 48(1)(a) to (e) are not to be construed expansively but narrowly. Thus, in Ssangyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 [ Ssangyong ], it was held: - 45. After referring to the New York Convention, this Court delineated the scope of enquiry of grounds under Sections 34/48 (equivalent to the grounds under Section 7 of the Foreign Awards Act, which was considered by the Court), and held : (Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , SCC pp. 671-72 681-82, paras 34-37 65-66) 34. Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial arbitration that a national court should not interfere with the substance of the arbitration. (p. 269) 36. Similarly Alan Redfern and Martin Hunter have said: The New York Convention does not permit any review on the merits of an award to which the Convention applies and, in this respect, therefore, differs from the provisions of some systems of national law governing the challenge of an award, where an appeal to the courts on points of law may be permitted. (Redfern Hunter, Law and Practice of International Commercial Arbitration, 2nd Edn., p. 461.) 37. In our opinion, therefore, in proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. *** 65. This would imply that the defence of public policy which is permissible under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that under Article I(e) of the Geneva Convention Act of 1927, it is permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ssangyong) 41. Likewise, in Vijay Karia v. Prysmian Cavi E Sistemi SRL, (2020) 11 SCC 1 [ Vijay Karia ], this Court held: 24. Before referring to the wide-ranging arguments on both sides, it is important to emphasise that, unlike Section 37 of the Arbitration Act, which is contained in Part I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a domestic arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognise and enforce a foreign award but not the other way around (i.e. an order recognising and enforcing an award). This is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely narrow grounds contained in Section 48 of the Act and which have been rejected. This is in consonance with the fact that India is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (hereinafter referred to as New York Convention ) and intends - through this legislation - to ensure th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to the agreement being under some incapacity, or the agreement being invalid under the law to which parties have subjected it. There can be no doubt that a non-party to the agreement, alleging that it cannot be bound by an award made under such agreement, is outside the literal construction of Section 48(1)(a). Also, it must not be forgotten that whereas Section 44 speaks of an arbitral award on differences between persons , Section 48(1)(a) refers only to the parties to the agreement referred to in Section 44(a). Thus, to include non-parties to the agreement by introducing the word person would run contrary to the express language of Section 48(1)(a), when read with Section 44. Also, it must not be forgotten that these grounds cannot be expansively interpreted as has been held above. The grounds are in themselves specific, and only speak of incapacity of parties and the agreement being invalid under the law to which the parties have subjected it. To attempt to bring non-parties within this ground is to try and fit a square peg in a round hole. 43. Quite apart from the fact that Section 48(1)(a) was not put forward either before the learned Single Judge or the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng judgment of Lord Mance JSC set out the facts and posed the question before the Court thus: - 2 ...The tribunal in a first partial award dated 26 June 2001 concluded that the Government was a true party to the agreement and as such bound by the arbitration clause, and so that the tribunal had jurisdiction to determine Dallah s claim against the Government. The central issue before the English courts is whether the Government can establish that, applying French law principles, there was no such common intention on the part of the Government and Dallah as would make the Government a party. 47. The learned Judge then noted, in para 11, that the argument made before the Tribunal was that the Trust was either the alter ego of the Government of Pakistan or the Government of Pakistan was the successor to the Trust. Since the alter ego argument found favour with the Tribunal, and since it was not pursued before the Supreme Court, the conclusion that the award was bad would necessarily follow. In para 31, Lord Mance JSC made it clear that a court seized of an issue under Section 103(2)(b) will examine, both carefully and with interest, the reasoning and conclusion of an arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vishwanathan relied on a judgment of the Supreme Court of Victoria, Australia, in the case of IMC Aviation Solutions Pty Ltd. v Altain Khuder LLC [2011] VSCA 248 to submit that, where a party resists enforcement of a foreign award on the ground that it is not a signatory to the arbitration agreement, the enforcing court is duty bound to examine the question of jurisdiction by itself. 51. In the said case, the Supreme Court of Victoria, after citing Dallah s case with approval, held that the foreign award in that case cannot be enforced against a party who was not a signatory to the arbitration agreement. This decision was premised on the reasoning that the words the arbitration agreement is not valid appearing in Section 8(5) (b) of the Australian International Arbitration Act, 1974 [ Australian Act ] (which is equivalent to Section 48(1)(a) of the Indian Arbitration Act, 1996) includes the ground that the award-debtor was not a party to the arbitration agreement . 52. What is important to note is that there is a significant difference in the Australian Act i.e., Section 8(1) of the Australian Act (which is analogous to Section 46 of the Indian Arbitration Act, 1996) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he award was made has already been resolved against that person. This is evident from s 8(5)(a), which refers to a party to the arbitration agreement , and s 8(5)(f), which refers to the parties to the arbitration agreement . If these provisions are read literally, the grounds covered by them are only available to parties to the arbitration agreement. It is not clear why these provisions should be so confined if it is the intention of the Act to permit a person that alleges that he or she is not a party to an arbitration agreement to resist enforcement of the award under s 8(5). xxx xxx xxx 165 It cannot be said that the ground that the award debtor was not a party to the arbitration agreement in pursuance of which the award was made is more significant than, for example, the ground that the arbitration agreement pursuant to which the award was made was not valid. There is no reason to think that an award debtor has greater justification to be aggrieved because it maintains that it was not a party to the arbitration agreement than an award debtor that maintains that the arbitration agreement was invalid because it was forged or obtained by fraud. If the forgery or fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable when construing Section 48(1)(a) of the Arbitration Act, 1996 for the same reason as Dallah is inapplicable. 55. As a matter of fact, the Singapore High Court in Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd Anr., [2006] SGHC 78, has arrived at a conclusion, on facts similar to ours, that the equivalent of Section 48(1)(a) in the Singapore Act would not be attracted. 56. In the facts of this case, Aloe Vera of America, Inc. [ AVA ], a company incorporated and existing under the laws of Texas, USA, was a manufacturer and distributor of aloe vera products. One Mr. Chiew was employed by AVA to be an independent distributor of the aforesaid products. When AVA decided to close its Singapore office, Mr. Chiew persuaded AVA to let him take over AVA s Singapore operations. He established Asianic Food (S) Pte Ltd. [ Asianic ] for this purpose, as a result of which, an Exclusive Supply, Distributorship and License Agreement was entered into between AVA and Asianic. Mr. Chiew signed the agreement on behalf of Asianic. This agreement was subsequently terminated, with AVA commencing arbitral proceedings against both Asianic and Mr. Chiew. Mr. Chiew took the position that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Egypt. [The Convention does not sanction second-guessing the arbitratorʼs construction of the partiesʼ agreement. It is well-settled that absent extraordinary circumstances , a confirming court is not to reconsider the arbitratorsʼ findings. [The arbitratorsʼ] conclusion of partnership under the contract is one of construction of the partiesʼ agreement and will not be reviewed by the Court, absent extraordinary circumstances. In the instant case, no such extraordinary circumstances exist. Whilst the decision of Batts J may have been reversed by the Court of Appeals [404 F 3d 657 (2nd Cir, 2005)], I respectfully agree with his observations which are in line with the general approach taken by an enforcement court to the decision of the arbitral tribunal in question. They are also consonant with the views of the court in the Hebei case which underline that the approach towards the decisions of foreign arbitral tribunals in Convention countries is to recognise the validity of the same and give effect to them subject to basic notions of morality and justice. The Court of Appeals in the Sarhank case took a different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 34(2)(a)(iii) and (iv) as applicable to the facts of the present case. (emphasis supplied) 59. The judgment in Ssangyong (supra) noted in para 29 that Section 48 of the Act has also been amended in the same manner as Section 34 of the Act. The ground of patent illegality appearing on the face of the award is an independent ground of challenge which applies only to awards made under Part I which do not involve international commercial arbitrations. Thus, the public policy of India ground after the 2015 amendment does not take within its scope, perversity of an award as a ground to set aside an award in an international commercial arbitration under Section 34, and concomitantly as a ground to refuse enforcement of a foreign award under Section 48, being a pari materia provision which appears in Part II of the Act. This argument must therefore stand rejected. 60. The appellants then pressed Section 48(1)(c) into operation. As can be seen, Section 48(1)(c) relates to an award which 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 submissions t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority named in the arbitration agreement or by a court on an application by a party to the arbitration agreement. We may elaborate: (a) If an arbitration agreement provides that all disputes between the parties relating to the contract (some agreements may refer to some exceptions) shall be referred to arbitration and that the decision of the arbitrator shall be final and binding, the reference contemplated is the act of parties to the arbitration agreement, referring their disputes to an agreed arbitrator to settle the disputes. (b) If an arbitration agreement provides that in the event of any dispute between the parties, an authority named therein shall nominate the arbitrator and refer the disputes which required to be settled by arbitration, the reference contemplated is an act of the appointing authority referring the disputes to the arbitrator appointed by him. (c) Where the parties fail to concur in the appointment of the arbitrator(s) as required by the arbitration agreement, or the authority named in the arbitration agreement failing to nominate the arbitrator and refer the disputes raised to arbitration as required by the arbitration agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of the 1996 Act. To bring in by the backdoor grounds relatable to Section 28(3) of the 1996 Act to be matters beyond the scope of submission to arbitration under Section 34(2)(a)(iv) would not be permissible as this ground must be construed narrowly and so construed, must refer only to matters which are beyond the arbitration agreement or beyond the reference to the Arbitral Tribunal. 61. In the Aloe Vera of America case (supra), the Singapore High Court adverted to Section 31(2)(d) of the Singapore Act (which is the equivalent to Section 48(1)(c) of the Indian Arbitration Act, 1996), and then held: 64. Under s 31(2)(d), enforcement of the Award may be refused if it deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration or contains a decision on the matter beyond the scope of the submission to arbitration . 65. Mr Loh submitted that the Award should not be enforced in Singapore because it contains a decision on matters that are beyond the scope of the submission to arbitration the arbitration agreement was between AVA and Asianic and the submission to arbitration was restricted to those parties only. Joinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether an award dealt with differences not contemplated or falling within the terms of a submission or went beyond the scope of the submission. In Peter Cremer, no challenge was mounted on the basis of the Irish equivalent of s 31(2)(b) but it is quite clear that the court did not consider that a challenge, premised on the argument that a person was not a party to an agreement, could be made under s 31(2)(b). 68. In any event, Mr Dhillon submitted that in order to determine whether the award dealt with matters that were beyond the scope of the submission to arbitration, the law to be applied would have to be the governing law of the arbitration agreement since that law would control the way in which the arbitration agreement was construed. Accordingly, where a Convention award is to be enforced, the foreign law of the award would be applicable. In this case, Mr Chiew had brought no evidence based on Arizona law to prove that the Award contained a decision on a matter beyond the scope of the submission to arbitration. As for Javor v Francoeur, this case was distinguishable on its facts as the arbitrator there had held that the respondent was liable without f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the party and which results in a denial of justice to the prejudice of the party; or additional or new evidence is taken which forms the basis of the award on which a party has been given no opportunity of rebuttal, would, on the facts of a given case, render a foreign award unenforceable on the ground that a party has been unable to present his case. This must, of course, be with the caveat that such breach be clearly made out on the facts of a given case, and that awards must always be read supportively with an inclination to uphold rather than destroy, given the minimal interference possible with foreign awards under Section 48. 64. This judgment also expressly referred to arbitral awards which may be poorly reasoned as follows: - 24. . Also, it would only be in a very exceptional case of a blatant disregard of Section 48 of the Arbitration Act that the Supreme Court would interfere with a judgment which recognises and enforces a foreign award however inelegantly drafted the judgment may be. 83. Having said this, however, if a foreign award fails to determine a material issue which goes to the root of the matter or fails to decide a claim or counterclaim in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to adjudicate upon first two claims preferred by G.E.C. and only if it is found that G.E.C. is entitled to receive the first two amounts which ought to have been paid by Renusagar under the terms of the contract but which Renusagar had failed to pay that this third claim could, if at all, be allowed to G.E.C. In the real sense, therefore, this claim is directly, closely and inextricably connected with the terms and conditions of the contract, the payments to be made thereunder and the breaches thereof and as such will have to be regarded as a claim arising out of or related to the contract. As we shall point out presently this Court in one of its decisions has laid down the test for determining the question in such cases and the test is whether recourse to the contract, by which both the parties are bound, would be necessary for the purpose of determining whether the claim in question was justified or otherwise and this test, as indicated above, is clearly satisfied with regard to the third claim in the instant case. 40. We may, at this stage, refer to a passage in Russell on Arbitration and a few decided cases which fortify our aforesaid conclusion. In Russell on Arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted with the relevant charterers the vessel happened to be again in a Dutch port and was arrested again as a result of disputes as to the satisfactory nature of the original bank guarantee. The owners arbitrated a claim for damages in respect of each of the two arrests of the vessel. The charterers argued that these were claims in tort and outside the arbitrator's jurisdiction. The Court held that arbitrator had jurisdiction (1) over the first arrest as it was closely connected with the dispute under the contract, and was indeed a direct consequence of a claim for damages under the contract, and (2) over the second arrest as it was part and parcel of the original arrest. xxx xxx xxx 44. In Alliance Jute Mills Co. Ltd. v. Lalchand Dharamchand [AIR 1978 Cal 19] disputes between the parties to a commercial contract were arbitrable under the bye-laws of the East India Jute Hessian Exchange Association and the relevant bye-law ran thus: All matters, questions, disputes, difference and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract shall be referred to arbitration.... Under the commercial cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are clearly of the view that all the three claims referred by G.E.C. to the Court of Arbitration of I.C.C. do arise out of and are related to the commercial contract in fact the first two claims arise under the contract ) and squarely fall within the widely worded Arbitration clause being Article XVII contained in the commercial contract. It is also clear that the Arbitration clause embraces even the question of its effect (scope), that is to say, it embraces the issue of the arbitrability of the three claims Questions whether in law, namely, the law of the Forum, the arbitrators will have jurisdiction and power to decide the arbitrability of the claims or not and whether Renusagar's suit is liable to be stayed or not will be considered by us next but at this stage we are categorically negativing the contentions of counsel for Renusagar that on merits the three claims are beyond the scope or purview of the Arbitration clause or that the Arbitration clause on its own language does not embrace the issue of arbitrability of the three claims. 68. In Tarapore Co. v. Cochin Shipyard Ltd., (1984) 2 SCC 680, this Court held: 39. Phrases such as claim arising out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons which would include persons claiming under them and that, therefore, a foreign award would be binding on parties alone and not on others. First and foremost, Section 46 does not speak of parties at all, but of persons who may, therefore, be non-signatories to the arbitration agreement. Also, Section 35 of the Act speaks of persons in the context of an arbitral award being final and binding on the parties and persons claiming under them , respectively. Section 35 would, therefore, refer to only persons claiming under parties and is, therefore, more restrictive in its application than Section 46 which speaks of persons without any restriction. Quite apart from this, another important conundrum arises from the Division Bench judgment in the present case. The Division Bench judgment applied Delaware law to satisfy itself that such law had indeed been followed to apply the alter ego doctrine correctly, as a result of which the foreign award would have to be upheld. We wish to indicate that this approach is completely erroneous. First and foremost, Section 48 does not contain any ground for resisting enforcement of a foreign award based upon the foreign award being cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r misapplication of law is generally not a violation of public policy within the meaning of the New York Convention. That result has been repeatedly and squarely affirmed by decisions in U.S., Swiss, French, English, German, Austrian, Singaporean, Hong Kong, Indian, Korean and other courts. Thus, the fact that an arbitral tribunal applies a law that is different from that of the recognition forum s law, or wrongly applies the recognition forum s laws, or reaches a result that is contrary to that which the recognition forum s courts would reach when applying their own (or a foreign) law, is not a basis for finding a violation of public policy under Article V (2) (b). The same principle is even more clearly applicable with regard to factual findings by an arbitral tribunal (at pages 3667-3669) xxx xxx xxx It is frequently said that conduct involving violations of certain types of criminal prohibitions implicates national and international public policies, crimes of terrorism, piracy, slave-trading, drug smuggling, torture, murder, kidnapping and robbery are all typically identified as examples of public policy. As discussed above, in the context of arbitration agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , argument based upon most basic notions of justice , it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. . 75. The Arbitrator correctly held that as nothing was forthcoming from any of the appellants, he would have to make a best judgment assessment for damages. In making that assessment, he took into account the commission that was being earned by GBT from the two clients of DMC and arrived at a figure of 100,000 USD per month and then found, on a reasonable estimate, that they would continue to be clients for a period of four years, as a result of which the figure of 6,948,100 USD was reached. 76. That such guesstimates are not a stranger to the law of damages in the U.S. and other common law tradition nations has been established very early on in a judgment of Asutosh Mookerjee, J. reported as Frederick Thomas Kingsley v. The Secretary of State for India AIR 1923 Cal 49. In this judgment, a learned Division Bench of the Calcutta High Court put it thus: - It may be conceded that though every breach of duty arising out of a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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