TMI Blog2020 (4) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the previous year to the next year because of the Export Control Order without permission of the Government. In the present case, because of the clear stipulation in Clause 14 of the Agreement, it is apparent that the parties have agreed for a contingent contract. They knew very well that the Government's executive, or legislative actions might come in the way as provided in Clause 14 of the Agreement. Thus, in this case, Section 32 of the Contract Act is attracted and not the provisions of Section 56. It was an agreement to do an act impossible in itself without permission, and that is declared to be void by Section 32. The contract was capable of being performed in case the Government gave the requisite authorization - Section 56 is not attracted as the promisor and promisee both knew the reason in advance as in agreement such a contingency was provided itself in case of Government's executive order comes in the way, for cancellation of the contract. Thus, the contract became void on the happening of the contingency, as provided in Section 32 of the Contract Act. This Court in SATYABRATA GHOSE VERSUS MUGNEERAM BANGUR CO. [ 1953 (11) TMI 19 - SUPREME COURT] , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enforcement of the award will be contrary to public policy, the foreign award may not be enforced. The foreign award may also not be executed in the case as per Section 7(1)(a)(i) if the parties to the agreement under the law applicable are under some incapacity or agreement is not valid under the law. Similar exigency is provided in Section 7(1)(a)(ii) if proper notice of appointment of Arbitrator is not given or the party was unable to present its case. Section 7(1)(a)(iii) provides that if the award deals with the questions not referred or contains decisions on matters beyond the scope of the agreement renders award unenforceable. Section 7(1)(a)(iv) makes an award not capable of enforcement in case the composition of the Arbitration Tribunal or procedure is not in accordance with the agreement of the parties. When the award can be said to be contrary to public policy? - HELD THAT:- This Court considered the issue in several decisions. The expression public policy concerning the agreement relates to the public policy of the country where award is being enforced. Section 23 of the Contract Act, 1872 deals with what consideration and objects are lawful and what not. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Dated:- 22-4-2020 - Arun Mishra, M.R. Shah And B.R. Gavai, JJ. JUDGMENT Arun Mishra, J. 1. The question involved in the present appeal is the enforceability of the foreign award. The main objections for its enforceability are (i) whether NAFED was unable to comply with the contractual obligation to export groundnut due to the Government's refusal?; (ii) whether NAFED could have been held liable in breach of contract to pay damages particularly in view of Clause 14 of the Agreement?; and (iii) whether enforcement of the award is against the public policy of India? 2. The NAFED and the Alimenta S.A. entered into a contract for the supply of 5,000 metric tonnes of Indian HPS groundnut (for short, commodity ). Clause 11 of the contract provided that terms and conditions would be as per FOSFA, 20 Contract, a standard form of contract which pertains to the CIF contract. The contract entered into was not a Free on Board (FOB) contract. 3. NAFED was a canalizing agency for the Government of India for the exports of the commodity. For any export, which is to be carried forward to next year from the previous year, NAFED required the express permission and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um. 9. On 21.11.1980, the NAFED intended to perform the first Addendum in the oblivion of the fact that it had no permission under the Export Control Order to carry forward the export for the season 1979-80 to the next year 1980-81. Being a Canalizing agency for the Government of India, NAFED couldn't carry forward the supply for the subsequent year. NAFED approached the Government of India to grant permission. 10. The Ministry of Agriculture, Government of India, vide letter dated 1.12.1980 directed NAFED not to ship any leftover quantities from previous years. It was made clear that the export of commodities was restricted under a quota system and that NAFED could not carry forward the previous years' commitment to the subsequent year. The commitment entered into by NAFED was objected to. Apart from that, the price of the commodity had escalated thrice than the prevailing price within one year. Inter alia, for the aforesaid reasons, the Government of India asked NAFED not to implement the previous year contract. It was for a particular season. 11. On 6.12.1980 and 9.12.1980, NAFED again requested the Government of India to allow the release of quota in the curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FA by its telex requested NAFED to appoint Arbitrator on its behalf by 20.4.1981, failing which FOSFA would appoint an arbitrator on behalf for NAFED. 17. On 9.4.1981, NAFED by telex message through their counsel informed FOSFA that it had no jurisdiction to proceed with the arbitration in view of the order of stay by the High Court and any action taken by Alimenta S.A. or by Mr. Scott of FOSFA would be illegal and void. On 22.4.1981, the matter came up before the High Court of Delhi. The counsel on behalf of the Alimenta S.A. was granted four weeks to file a reply; the case was adjourned to 27.7.1981. The interim order of stay was accordingly extended till 21.7.1981. 18. However, in disregard of the order passed by the High Court, FOSFA appointed Mr. F.A.D. Ralfe as an Arbitrator on behalf of the NAFED on 23.4.1981. Thus, the NAFED urged that it was deprived of the right to appoint its nominee Arbitrator. The NAFED vide its letter dated 1.5.1981 informed FOSFA that despite the order of stay by the High Court, contumacious steps were taken to appoint the Arbitrator on its behalf and it was further stated that the counsel appearing for Alimenta S.A., stated in the Court that A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SD 765 per metric tonnes plus USD 15 per metric tonnes for double bags and the settlement price of USD 2275 per metric tonnes plus USD 15 per metric tonnes for double bags as damages. The amount was ordered to be paid with interest at the rate of 10.5% per annum from 13.2.1981 till the date of the award. 23. Being aggrieved by the award, NAFED filed an appeal before the Board of Appeal on 16.1.1990, however, on 13.5.1990 and 30.5.1990 multiple requests were made by M/s. Clyde and Co. (solicitor firm) to represent NAFED before the Board of Appeal, considering there were special circumstances and Indian law was required to be explained. The Board of Appeals rejected the request by NAFED to be represented through its Solicitors on 14.5.1990. 24. Ultimately, the Board of Appeal on 14.9.1990 while deciding the appeal compounded NAFED's issues by enhancing the award, whereas Alimenta S.A. filed no appeal. NAFED was directed to pay interest components at the rate of 11.25% instead of 10.5% p.a. The interest was enhanced in the absence of an appeal by Alimenta S.A. The Arbitrator nominee of Alimenta S.A., who passed the award, represented the case on behalf of the Alimenta S.A. b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nenforceable Under Section 7(1)(b) of the Foreign Awards Act. The award/decree does not deal with the restriction imposed by the Government of India as to the export of the commodity. Award flouts the basic norms of justice. The enforcement of such an award would result in the unjust enrichment of Alimenta S.A. at the cost of the very survival of the Appellant organisation. The enforcement procedure is barred by limitation. The same was not brought within 30 days in terms of Article 119, Schedule I of the Limitation Act, 1963. The learned Single Judge could not have converted the award into a decree. The learned Single Judge awarded interest at the rate of 18 percent per annum; besides, in case there is exchange deviation by way of loss, NAFED would be required to make good such loss. NAFED was not given due opportunity to present its case by the Arbitral Tribunal. Arbitrator-nominee of Alimenta S.A. represented case on behalf of Alimenta S.A. before the Board of Appeal, award was unfair, and enhancement of interest in the absence of appeal was also illegal. The decision is contrary to the public policy of India as laid down in various decisions. 29. Per contra, Mr. C.A. Sundara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Be that as it may. The fact remains that the Government of India's permission was required to carry forward the export for the season 1979-80 to the year 1980-81 under the Export Control Order, which was not given. When it was again sought for, it was specifically refused by the Government of India on various grounds. 32. Clause 14 of the FOSFA, 20 Contract dated 12.1.1980, entered between the parties is significant in this regard. The relevant Clauses 14, 18, and 20 are extracted hereunder: EXTRACTS OF RELEVANT CLAUSES OF FOSFA 20 CONTRACT DATED 12-01-1980 BETWEEN PETITIONER AND RESPONDENT 14. PROHIBITION: In the event, during the shipment period of prohibition of export of any other executive or legislative act by or on behalf of the Government of the country of origin or of the territory where the port/s or shipment named herein is/are situate, or of blockade or hostilities, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rigin, such restriction shall be deemed by both the parties to apply to the contract. Thus, if the shipment becomes impossible by reasons mentioned in the clause, the agreement shall be cancelled. 33. The Government of India, Ministry of Agriculture and Irrigation wrote a letter on December 1, 1980, to the Managing Director of the NAFED in which it pointed out that it was undesirable to make the supply in the current season at the rate of previous years contract and apart from that no exporter could undertake to export any commodity with such a wide variation in prices. It was also pointed out that the export contract of last year is not supposed to be carried forward automatically to next year. The export of the commodity was restricted under a quota system. NAFED could not agree on its own to move forward last year's commitment to the current year without prior approval of the Government. Therefore, NAFED was asked not to consider taking up the previous year's contract for implementation in the current crop season and inform it to the Government. Para 2 of the letter is extracted hereunder: 2. I am told that NAFED could not fulfil some of the contracts for exports l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in the way of the NAFED to affect the supply by exporting the commodity to Alimenta S.A. This was covered within Clause 14 of the Agreement mentioned above. The prohibition was on account of the Government's refusal. 36. It is apparent from the provisions of the contract dated 12.1.1980 that the quantity of 5,000 metric tonnes, to be increased up to 8,000 metric tonnes, depending upon the availability of stocks. Clause 8 of the Agreement dated 12.1.1980 provided that shipment was to be from Saurashtra port at the buyer's option during February/March/April 1980. The other terms and conditions were as per FOSFA, 20 contract terms. Addenda dated 18.8.1980 and 6.10.1980 were executed to the agreement/contract dated 12.1.1980. The NAFED had no authority to enter into export for the previous years without prior permission of the Government of India, and it executed both the addenda without such permission. 37. The Minutes of Meeting of Business Committee of NAFED, dated 21.11.1980 at Agenda Item No. 4, notes that there were unseasonable rains in the Saurashtra region and due to cyclone, etc. the groundnut crop was severely damaged, and there was less production. There wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts to be entered into that season at the prevailing market prices. NAFED were not entitled to use any part of the quota to fulfil the previous years contracts. Furthermore, I must advice you, as you certainly know, that you could not have utilized any unused part of the quota for the previous year to fulfil old contracts. 3. Ministry of Agriculture notified you that permission for you to fulfil the previous year's contracts was refused. This was a lawful directions which you were bound to obey. However, even without this express direction you could not have fulfilled these contracts. You would have needed from Ministry of Commerce an additional export quota covering the quantities required. You applied for additional quota generally and this application was refused in view of the prevailing market conditions both internally and externally. Most certainly no additional quota would have been granted to enable you to fulfil old contracts at the previous season's prices. Yours faithfully (VINOD RAI) Deputy Secretary to the Government of India It is apparent that the Government of India issued a direction that was binding upon the NAFED. Without permission, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such a case the law declares the parties to be discharged from further performance. (emphasis supplied) 42. Learned senior Counsel argued that as there was frustration, the contract determined automatically; it could not be continued by affirmation. The Appellant has also placed reliance on the decision in Delhi Development Authority v. Kenneth Builders Developers Private Limited and Ors., (2016) 13 SCC 561 wherein the court held that the contract of Kenneth Builders with the DDA stood frustrated and made impractical to perform because of the prohibition imposed on any construction activity being undertaken on the project land. The Court observed: 30. The interpretation of Section 56 of the Contract Act came up for consideration in Satyabrata Ghose v. Mugneeram Bangur Co. AIR 1954 SC 44. It was held by this Court that the word impossible used in Section 56 of the Contract Act has not been used in the sense of physical or literal impossibility. It ought to be interpreted as impracticable and useless from the point of view of the object and purpose th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Products Co. Ltd. (1916) 2 AC 397 (HL) AC p. 406) ... If substantially the whole contract becomes impossible of performance or in other words impracticable by some cause for which neither was responsible. * * * 17. It must be pointed out here that if the parties do contemplate the possibility of an intervening circumstance which might affect the performance of the contract, but expressly stipulate that the contract would stand despite such circumstance, there can be no case of frustration because the basis of the contract being to demand performance despite the happening of a particular event, it cannot disappear when that event happens. As Lord Atkinson said in Matthey v. Curling, (1922) 2 AC 180 (HL): (AC p. 234) ... a person who expressly contracts absolutely to do a thing not naturally impossible is not excused for non-performance because of being prevented by the act of God or the King's enemies ... or vis major. This being the legal position, a contention in the extreme form that the doctrine of frustration as recognised in English law does not come at all within the purview of Section 56 of the Contract Act cannot be accepted. 36. On a conspectus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse. (c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void. 46. Section 56 of the Contract Act deals with the agreement to do an impossible act or to do acts afterward become impossible or unlawful. It also provides for liability of the promisor to do something which he knew or might have known with reasonable diligence an act which is impossible or unlawful; as such, the promisor must make compensation for the non-performance of the promise. 47. Section 32 of the Contract Act applies in case the agreement itself provides for contingencies upon happening of which contract cannot be carried out and provide the consequences. To this case, provisions of Section 32 of the Contract Act is attracted and not Section 56. In case an act becomes impossible at a future date, and that exigency is not provided in the agreement on the happening of which exigency, impossible or unlawful, the promisor had no control which he could not have prevented, the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on happening of particular circumstances. The dissolution of the agreement would take place under the terms of the contract itself. Such cases would be outside the purview of Section 56 of the Contract Act altogether. They would be dealt with Under Section 32 of the Contract Act, which deals with contingent contracts. This Court held: 9. The first paragraph of the Section lays down the law in the same way as in England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates the law relating to the discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy, they cannot derogate from the general words used in the enactment. This much is clear that the word impossible has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible, but it may be impracticable and useless from the point of view of the object and purpose which the parties had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract Act, 1872. We hold, therefore, that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It would be incorrect to say that Section 56 of the Contract Act applies only to cases of physical impossibility and that where this Section is not applicable, recourse can be had to the principles of English law on the subject of frustration. It must be held also, that to the extent that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions. The decisions of the English Courts possess only a persuasive value and may be helpful in showing how the Courts in England have decided cases under circumstances similar to those which have come before our courts. 15. These differences in the way of formulating legal theories really do not concern us so long as we have a statutory provision in the Indian Contract Act. In deciding cases in India the only doctrine that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreed to by the parties embodying a provision for discharge, because the parties did not think about the matter at all nor could possibly have any intention regarding it. When such an event or change of circumstance occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object-Vide Morgan v. Manser, 1947-2 All ER 666 (L). This may be called a Rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all Rules of construction. This is really a Rule of positive law and as such comes within the purview of Section 56 of the Indian Contract Act. 50. The Court followed the decision in Satyabrata Ghose (supra) in Naihati Jute Mills Ltd. v. Khyal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law as striking at the root of the contract as a whole occurs, it is the court which can pronounce the contract to be frustrated and at an end. This is really a positive Rule enacted in Section 56 which governs such situations. 51. In Boothalinga Agencies v. V.T.C. Poriaswami Nadar AIR 1969 SC 110 again the doctrine of frustration of contract came up for consideration. It was held that the provisions of Section 56 of the Contract Act could not apply to self-induced frustration. The relevant portion is extracted hereunder: 10. The doctrine of frustration of contract is really an aspect, or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a Rule of positive law and does not leave the matter to be determined according to the intention of the parties. 13. In English law, therefore, the question of frustration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 1935 AC 524. In that case, the Respondents chartered to the Appellants a steam trawler fitted with an otter trawl. Both parties knew at the time of the contract that it was illegal to use an otter trawl without a licence from the Canadian government. Some months later the Appellants applied for licences for five trawlers which they were operating, including the Respondents' trawler. They were informed that only three licences would be granted, and were requested to state for which of the three trawlers they desired to have licences. They named three trawlers other than the Respondents', and then claimed that they were no longer bound by the charter-party as its object had been frustrated. It was held by the Judicial Committee that the failure of the contract was the result of the Appellants' own election, and that there was therefore no frustration of the contract. We think the principle of this case applies to the Indian law and the provisions of Section 56 of the Indian Contract Act cannot apply to a case of self-induced frustration . In other words, the doctrine of frustration of contract cannot apply where the event which is alleged to have frustrated the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has actually happened its effect on the possibility of performing the contract. Where one party claims that there has been frustration the other party contests it, the Court has got to decide the issue 'ex post facto' on the actual circumstances of the case. The data for decision are, on the one hand, the terms and construction of the contract, read 'n the light of the then-existing circumstances, and on the other hand the events which have occurred. It is the court which has to decide what is the true position between the parties. Denny Mott's' case, 1944 A.C. 265. Lord Sumner observed in the 'Hirji Mulji' case (1926) A.C. 497 that the legal effect of the frustration of the contract does not depend on the intention of the parties or their opinions or even knowledge as to the events which brought about the frustration but upon its occurrence in such circumstances as to show it to be inconsistent with the further prosecution of the adventure. In my view, this principle is applicable in this case. 23. The main object of the contract was the transhipment of the goods from Bihar to Bengal by Railway in my opinion, having regard to the events t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial men in cases of this sort. That being so, and applying the principle that this contract was not a contract made indifferently for the sale of goods or for the payment of damages, but a contract for the delivery of goods, it seems to me that performance is, impossible, that the contract having been made upon the assumption that the normal state of things would have come into existence by March or April of this year, the intention of the contract would be perverted, if I was to hold that the sellers are to insure the buyers against this chance of the control of Government going on. For these reasons, I answer the questions which have been put to me in this way: Firstly: Did, in the circumstances hereinbefore mentioned, such a contract become void and were the sellers excused from the performance thereof? My answer is, yes, the contract became void before breach. Secondly: Are the buyers entitled to recover any compensation from the sellers? I answer that no, either in respect of goods which were lying ready at the up-country station which the railway company refused to accept for despatch or in respect of goods which were not so delivered. I answer no to both parts of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impracticable or useless, having regard to the object and purpose the parties had in view, then it must be held that the performance of the contract has become impossible. But the supervening events should take away the basis of the contract, and it should be of such a character that it strikes at the root of the contract. In this case, 'expected event' was a refusal by the Government as agreed to under Clause 14 of the Agreement. On the happening of such an event, it is so fundamental as to be regarded by law as striking at the root. As such, we are of the opinion that the contract was rendered void in terms of Section 32 of the Contract Act. 56. In Narayana Chandrasekhara Shenoy and Bros. by sole Proprietor Narayana Shanbog v. R. Palaniappa Mudaliar AIR 1952 Mad. 670, a question arose whether the Defendant was required to supply jaggery by rail, which became impossible by the issuance of a Government notification controlling the movement of jaggery by rail. The Plaintiff refused to bear the additional expenditure entailed by the change in the mode of transport. The Court held that even assuming that the contract had not become impossible of performance, the Defendan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not referred or contains decisions on matters beyond the scope of the agreement: Provided that if the decisions on matters submitted to arbitration can be separated from those not submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (iv) 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 (v) 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; or (b) if the court dealing with the case is satisfied that---- (i) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (ii) the enforcement of the award will be contrary to public policy. (2) If the court before which a foreign award is sought to be relied upon is satisfied that an application for the setting aside or suspension of the award has been made to a competent authority referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic policy between the matter involving domestic law, and that involving conflict of laws was explained. The court considered that because of absence of a workable definition of 'international public policy' in Article V(2)(b) of New York Convention it is difficult to construe the expression public policy in Section 7(1)(b)(ii) and opined that the doctrine of public policy under the said provision would mean as the courts in India apply it. This Court held that enforcement of the foreign award would be refused on the ground that it was contrary to public policy if such enforcement would be contrary to (1) fundamental policy of Indian Law, (2) the interest of India, and (3) justice or morality. The relevant portion is extracted hereunder: 63. In view of the absence of a workable definition of international public policy, we find it difficult to construe the expression public policy in Article V(2)(b) of the New York Convention to mean international public policy. In our opinion, the said expression must be construed to mean the doctrine of public policy as applied by the courts in which the foreign award is sought to be enforced. Consequently, the expression 'pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognition and enforcement of foreign awards which are governed by the principles of private international law, the expression public policy in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. 67. Having examined the scope of public policy Under Section 7(1)(b) (ii) of the Foreign Awards Act, we will now proceed to consider the various grounds on the basis of which the said provision is invoked by Renusagar to bar the enforcement for the award of the Arbitral Tribunal. As indicated earlier, Renusagar has invoked the said provision on the ground that enforcement of the award would be contrary to the public policy for the reason that such enforcement-- (a) would involve contravention of the provisions of FERA; (b) would amount to penalising Renusagar for not disreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) who could dispose of the matter within reasonable time fixed by them. It is for them to indicate the time-limit for disposal of the arbitral proceedings. It is for them to decide whether they should continue with the arbitrator(s) who cannot dispose of the matter within reasonable time. However, non-providing of time-limit for deciding the dispute by the arbitrators could have no bearing on interpretation of Section 34. Further, for achieving the object of speedier disposal of dispute, justice in accordance with law cannot be sacrificed. In our view, giving limited jurisdiction to the court for having finality to the award and resolving the dispute by speedier method would be much more frustrated by permitting patently illegal award to operate. Patently illegal award is required to be set at naught, otherwise it would promote injustice. 31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 7(1)(b)(ii) of the Foreign Awards Act. It further opined that errors of fact by Board of Appeal obtained by the Appellant, relying on the report which was inconsistent with the terms of the contract would not bar enforceability of a foreign award on the ground of being contrary to the public policy of India and the court cannot look into the merits of the award at the stage of enforcement of the foreign awards, and observed: 27. In our view, what has been stated by this Court in Renusagar, 1994 Supp (1) SCC 644, with reference to Section 7(1)(b)(ii) of the Foreign Awards Act must apply equally to the ambit and scope of Section 48(2)(b) of the 1996 Act. In Renusagar, it has been expressly exposited that the expression public policy in Section 7(1)(b)(ii) of the Foreign Awards Act refers to the public policy of India. The expression public policy used in Section 7(1)(b)(ii) was held to mean public policy of India. A distinction in the Rule of public policy between a matter governed by the domestic law and a case involving conflict of laws has been noticed in Renusagar. For all this, there is no reason why Renusagar should not apply as regards the scope of inquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concept of justice and morality beside that of patent illegality on consideration of the various decisions, the court observed: 18. In Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, the Supreme Court construed Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961: 7. Conditions for enforcement of foreign awards.--(1) A foreign award may not be enforced under this Act-- * * * (b) if the Court dealing with the case is satisfied that-- * * * (ii) the enforcement of the award will be contrary to the public policy. In construing the expression public policy in the context of a foreign award, the Court held that an award contrary to (i) The fundamental policy of Indian law, (ii) The interest of India, (iii) Justice or morality, would be set aside on the ground that it would be contrary to the public policy of India. It went on further to hold that a contravention of the provisions of the Foreign Exchange Regulation Act would be contrary to the public policy of India in that the statute is enacted for the national economic interest to ensure that the nation does not lose foreign exchange which is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards of the arbitrators. The Court of King's Bench never interfered by certiorari with the award of an arbitrator, because it was a private tribunal and not subject to the prerogative writs. If the award was not made a Rule of court, the only course available to an aggrieved party was to resist an action on the award or to file a bill in equity. If the award was made a Rule of court, a motion could be made to the court to set it aside for misconduct of the arbitrator on the ground that it was procured by corruption or other undue means (see Statutes 9 and 10 Will. III, C. 15). At one time an award could not be upset on the ground of error of law by the arbitrator because that could not be said to be misconduct or undue means, but ultimately it was held in Kent v. Elstob, (1802) 3 East 18, that an award could be set aside for error of law on the face of it. This was regretted by Williams, J., in Hodgkinson v. Fernie, (1857) 3 CB (NS) 189, but is now well established. 67. In Ssanyong Engineering Construction Co. Ltd. v. National Highways Authority of India (NHAI), (2019) 8 SCALE 41, the Court concerning the public policy held: 23. What is clear, therefore, is that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , would also have to be characterised as perverse. 31. Given the fact that the amended Act will now apply, and that the patent illegality ground for setting aside arbitral awards in international commercial arbitrations will not apply, it is necessary to advert to the grounds contained in Section 34(2)(a)(iii) and (iv) as applicable to the facts of the present case. 33. In Renusagar (supra), this Court dealt with a challenge to a foreign award Under Section 7 of the Foreign Awards (Recognition and Enforcement) Act, 1961 [ Foreign Awards Act ]. The Foreign Awards Act has since been repealed by the 1996 Act. However, considering that Section 7 of the Foreign Awards Act contained grounds which were borrowed from Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [ New York Convention ], which is almost in the same terms as Sections 34 and 48 of the 1996 Act, the said judgment is of great importance in understanding the parameters of judicial review when it comes to either foreign awards or international commercial arbitrations being held in India, the grounds for challenge/refusal of enforcement Under Sections 34 and 48, respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited one. The control exercised by him is limited to verifying whether an objection of a Respondent on the basis of the grounds for refusal of Article V(1) is justified and whether the enforcement of the award would violate the public policy of the law of his country. This limitation must be seen in the light of the principle of international commercial 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 ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the field of private international law. Applying the said criteria, it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality. This judgment was cited with approval in Redfern and Hunter on International Arbitration by Nigel Blackaby, Constantine Partasides, Alan Redfern, and Martin Hunter (Oxford University Press, Fifth Ed., 2009) [ Redfern and Hunter ] as follows: 11.56. First, the New York Convention does not permit any review on the merits of an award to which the Convention applies. [This statement, which was made in an earlier edition of this book, has since been cited with approval by the Supreme Court of India in Renusagar Power Co. Ltd. v. General Electric Co. The court added that in its opinion 'the scope of enquiry before the court in which the award is sought to be enforced is limited [to the grounds mentioned in the Act] and does not enable a party to the said proceedings to impeach the Award on merits']. Nor does the Model Law. The same theme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce) (1996)]: The New York Convention does not provide for any control on the manner in which the arbitrators decide on the merits, with as the only reservation, the respect of international public policy. Even if blatant, a mistake of fact or law, if made by the arbitral tribunal, is not a ground for refusal of enforcement of the tribunal's award. Or, as a Brazilian recognition decision under the Convention held [Judgment of 19 August 2009, Atecs Mannesmann GmbH v. Rodrimar S/A Transportes Equipamentos Industriais e Armazes Gerais, XXXV Y.B. Comm. Arb. 330, 331 (Brazilian Tribunal de Justica) (2010)]: These questions pertain to the merits of the arbitral award that, according to precedents from the Federal Supreme Court and of this Superior Court of Justice, cannot be reviewed by this Court since recognition and enforcement of a foreign award is limited to an analysis of the formal requirements of the award. Commentators have uniformly adopted the same view of the Convention [See, for e.g., K.-H. Bockstiegel, S. Kroll P. Nacimiento, Arbitration in Germany 452 (2007)]. (at pp. 3707-3710) Likewise, the UNCITRAL Secretariat Guide on the Convention on the Recogniti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the High Court. The High Court on 20.3.1981 granted interim stay till 22.4.1981. A telex dated 20.3.1981 was sent informing that the High Court granted an interim stay. The FOSFA vide letter dated 6.4.1981 asked the NAFED to appoint its arbitrator by 20.4.1981. On 9.4.1981, NAFED informed FOSFA about the stay of the arbitration proceedings granted by the High Court. The interim order was extended on 22.4.1981 till further orders. On 23.4.1981, Mr. F.A.D. Ralfe, a nominee of the NAFED, was appointed as Arbitrator by FOSFA in the Arbitration Tribunal in violation of the order passed by the High Court. 71. It was also urged that after that, this Court stayed proceedings on 30.4.1982, it was responded by Alimenta S.A. on 4.5.1982 to NAFED that this Court did not have authority to stay the arbitration proceedings. It was also argued that on 1.5.1981, NAFED objected to the appointment of Mr. F.A.D. Ralphe for their representation in the arbitration. On 30.10.1981, NAFED filed a writ petition against the Alimenta S.A. and Arbitrator to prevent the arbitration proceedings. It was further argued that the Appellant was deprived of appointing arbitrators; the same was against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciple that those who defy a prohibition ought not to be able to claim that the fruits of their defiance are good, and not tainted by the illegality that produced them.' 28. In Gurunath Manohar Pavaskar v. Nagesh Siddappa Navalgund, (2007) 13 SCC 565, this Court while dealing with the similar issues held that even a court in exercise of its inherent jurisdiction Under Section 151 of the Code of Civil Procedure, 1908, in the event of coming to the conclusion that a breach of an order of restraint had taken place, may bring back the parties to the same position as if the order of injunction has not been violated. 29. In view of the above, it is evident that any order passed by any authority in spite of the knowledge of the interim order of the court is of no consequence as it remains a nullity. Thus, it was argued that the appointment of the arbitrator to constitute the Arbitral Tribunal violated the order of the Indian Court and it was against the public policy. Consequently, the Respondent, Alimenta S.A., could not approach the Indian Court to enforce such an award passed by the Arbitral Tribunal. 72. Though this Court passed an interim order, ultimately, it dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner or unless the Disciplinary Authority, having regard to the circumstances of the case, so permits. 23. It is needless to say that Rule 15 is a mandatory rule. That Rule regulates the guarantee given to Government servants Under Article 311. Government servants, by and large, have no legal training. At any rate, it is nobody's case that the Appellant had legal training. Moreover, when a man is charged with the breach of a Rule entailing serious consequences, he is not likely to be in a position to present his case as best as it should be. The accusation against the Appellant threatened his very livelihood. Any adverse verdict against him was bound to be disastrous to him, as it has proved to be. In such a situation, he cannot be expected to act calmly and with deliberation. That is why Rule 15(5) has provided for representation of a Government servant charged with dereliction of duty or with contravention of the Rule by another Government servant or in appropriate cases by a legal practitioner. 24. For the reasons mentioned above, we think that there had been a contravention of Rule 15(5). We are also of the opinion that the Appellant had not been afforded a reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concept of justice and Rules of procedure, as observed in The State of Punjab and Anr. v. Shamlal Murari and Anr., (1976) 1 SCC 719, wherein this Court found thus: 8. It is obvious that even taking a stern view, every minor detail in Rule 3 cannot carry a compulsory or imperative import. After all, what is required for the Judges to dispose of the appeal is the memorandum of appeal plus the judgment and the paper-book. Three copies would certainly be a great advantage, but what is the core of the matter is not the number but the presence, and the overemphasis laid by the court on three copies is, we think, mistaken. Perhaps, the Rule requires three copies, and failure to comply therewith may be an irregularity. Had no copy been furnished of any one of the three items, the result might have been different. In the present case, copies of all the three documents prescribed, have been furnished but not three copies of each. This omission or default is only a breach that can be characterised as an irregularity to be corrected by condonation on application by the party fulfilling the condition within a time allowed by the court. We must always remember that processual law is not to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a judge's conscience and points an angry interrogation at the law reformer. The processual law so dominates in certain systems as to overpower substantive rights and substantial justice. The humanist Rule that procedure should be the handmaid, not the mistress, of legal justice compels consideration of vesting a residuary power in judges to act ex debito justitiae where the tragic sequel otherwise would be wholly inequitable. ... Justice is the goal of jurisprudence -- processual, as much as substantive. 29. In State of Punjab v. Shamlal Murari, (1976) 1 SCC 719, the Court approved in no unmistakable terms the approach of moderating into wholesome directions what is regarded as mandatory on the principle that: (SCC p. 720) Processual law is not to be a tyrant but a servant, not an obstruction but an aid to justice. Procedural prescriptions are the handmaid and not the mistress, a lubricant, not a resistant in the administration of justice. In Ghanshyam Dass v. Dominion of India, (1984) 3 SCC 46, the Court reiterated the need for interpreting a part of the adjective law dealing with procedure alone in such a manner as to subserve and advance the cause of justice r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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