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TMI Blog2014 (9) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of the award. 3. Vitol has taken out the above notice under the provisions of Order 21 Rule 22(b) of the CPC as the execution of the award is filed under the provisions of Section 44A of the CPC; the award having been passed by the arbitral tribunal in reciprocating territory being London, UK. 4. Vitol has taken out this application under the provisions of Section 47 of the Arbitration and Conciliation Act, 1996 (the Act) for enforcement of the Foreign award (award) dated 17th January, 2011. BIL has applied for refusal of the enforcement of the award under Section 48 of the Act. 5. Vitol has filed a duly authenticated copy of the award as Exhibit -A to the Execution Application authenticated by the Notary Public City of London, England as a true copy of the original award. Vitol has also filed a certified copy of the arbitration agreement between the parties. 6. BIL would contend that the provisions contained in Section 47(1)(b) of the Act have not been complied since the certified copy of the entire arbitration agreement including what is called SCoTA is not annexed to the petition. Mr. Chinoy on behalf of the respondent drew the Court's attention to Clause 20 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy justice. It is held that that the provision of making the award the rule of Court required in the Arbitration Act, 1940 has been dispensed with in the 1996 Act and hence if such decree were to be passed and the Court has to examine the award for the parties, it would frustrate and defeat the object of the new Act. It is observed that in the 1996 Act the foreign award is already stamped as a decree and hence any party can apply for its enforcement under Section 47 to 49 of the Act. Under Section 47 the Court would only see evidence which the party applying for enforcement of a foreign award produces and upon seeing the conditions for Section 48, the award would be deemed to be a decree under Section 49. If the Court is satisfied that the foreign award is enforceable the Court must proceed to execute it as decree of a Court. 10. Consequently in the case of Naval Gent Maritime Ltd. Vs. Shivnath Rai Harnarain (I) Ltd, (2009) 163 DLT 391, it has been held that the foreign award requires neither any registration nor any stamping but can be enforced as a decree of the Court. It is observed in paragraph 18 of the judgment that in any case the issue of stamp duty cannot stand in the way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits of the request for refusal to enforce the award would, therefore, have to be considered. (I) Violation of Section 25.1 of the Arbitration Agreement: Clause 25.1 relates to amendments to the agreement between the parties. Under that clause amendments could be made to the agreement including the terms of the contract by mutual agreement of the parties but were to be binding only by written agreement signed by each of the parties or upon receipt of a duly authorised notice in writing to that effect to each party from the other. Clause 25.1 runs thus: "25.1 Amendments may be made to this agreement including the terms applicable to any transaction by mutual agreement of the parties, but shall only become binding by written agreement signed by each of the parties or upon receipt of duly authorized notice in writing to that effect to each party from the other". The clause has been considered amongst the SCoTA terms set out in the final award itself. The agreement between the parties was to buy and sell coal in four installments in the year 2009. If a consignment was not to be sold there was a certain charge called washout charge which was to be levied. BIL was to accept the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable, adjustment has been made and the final liability of BIL has been ascertained as payable under the arbitral award. The parties were governed by English Law under Clause 19 of the agreement. The learned arbitral tribunal has applied that law. That is the law of equitable estoppel upon the request by BIL for securing the amount under the washout charges pending the negotiations for a new contract. The learned arbitral tribunal has considered the law which allows a party to orally or impliedly modify a contract. That would be upon the act of the parties. The act of BIL requesting to secure the amount was taken to be an act by which it was bound, not under the contract between the parties but under the principle of equitable estoppel under which BIL would be estopped from contending contrary to its request and representation that Vitol may keep the washout amounts as security and not pay to BIL on the due dates. 17. It is seen that, in fact, such act of the parties would constitute no amendment to the agreement at all. The amendment to the agreement was contemplated. The agreement was not amended. If it had to be amended it certainly had to be amended in writing. The new price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct would tantamount to an amendment, under the English Law parties themselves acting against their contract cannot take advantage of their own act and hence would be equitably estopped. It was thus held. The learned arbitral tribunal has considered the said law in terms of the judgment in the case of the Kanchanjanga relied upon by the parties. In paragraph 80 of the award the learned arbitral tribunal has set out the basis of such an estoppel upon the premise that it would be inequitable to allow BIL to rely upon its legal rights under the contract after making the representation that it did as being the variation which under the contract was required to be in writing. The consequent finding of the learned arbitral tribunal that there was no breach of the agreement and hence the termination was bad and the consequent non -acceptance of the repudiation resulted in continuation of the contract which Vitol was entitled to follow as a matter of corollary. 19. Foreign law as a question of fact and has to be proved as such. Vitol has filed the affidavit of its Barrister in England to show the principles of English law relating to equitable estoppel. Indeed the principle of estoppel is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch grants any amount to or against any party under the law and which would have to be paid in foreign exchange by one of the parties would not be included within the mischief of clause 21 of the contract. 22. There is, therefore, nothing that the learned Arbitral Tribunal has decided against any of the terms of the contract between the parties. Once that aspect has been determined as per the law governing the parties, this Court, in enforcement of the award which has been passed, cannot interfere with it. 23. (II) Violation of Section 8 of the FEMA: Vitol was to pay the washout charges. BIL was to receive it. The amounts would accrue due to BIL on specified due dates in the contract. BIL had to pay fixed prices for the deliveries to be made in 2009. BIL kept the amount under the washout charges with Vitol as security. The amounts were not paid on due dates. They were indeed payable and admitted to be payable by Vitol. BIL has not sought to refuse to accept the amount. BIL would realise the amount so soon as the parties entered into a new contract or as demanded by it upon notice. The amounts have been granted by the learned arbitral tribunal as admitted amounts payable to BIL. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India a payment in rupees shall, except with the general or special permission of the Reserve Bank (RBI), do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing- (a) that the receipt by him of the whole or part of that foreign exchange or payment is delayed, or (b) that the foreign exchange or payment ceases in whole or in part to be receivable by him. (2) Where a person has failed to comply with the requirements of sub -section (1) in relation to any foreign exchange or payment in rupees, the Reserve bank may give to him such directions as appear to be expedient for the purpose of securing the receipt of the foreign exchange or payment, as the case may be." 28. Whereas Section 16 of FERA was enacted in negative terms of what an Indian person should not do, without RBI permission, Section 8 of FEMA is in positive terms of what he / she / it should do. 29. The purpose and object of the FEMA which repealed FERA was to consolidate and amend the law relating to foreign exchange (FE) to facilitate external trade and payments and to promote orderly development and maintenance of FE market in India. The Act, therefore, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the period 27th January, 2009 to 17th March, 2009. 31. BIL agreed to keep the amount payable to it in abeyance on 27th January, 2009. The amount then payable would fall due on 5th February, 2009. The second amount would fall due on 5th March, 2009. The contract came to be terminated in March, 2009 itself by BIL and the two installments then due and payable were claimed which has never been denied by Vitol. Mr. Chinoy, therefore, justifiably contended that the nature of retention of the amount and the consequential delay of the due date of the accrual of payment was, therefore, of about 7 weeks. 32. It is contended on behalf of the BIL that this retention, albeit temporary, would elude the nation FE to that extent and for that period. Consequently it would be in violation of Section 8 of FEMA. It is contended that whenever the FE accrues due it had to be repatriated to India and the deferment / retainment / the set off of that amount cannot be permitted. 33. It is argued on behalf of Vitol that Section 8 of FEMA is not absolute. It only requires reasonable steps to be taken to realise and repatriate the amount of FE due to India. It essentially seeks to prohibit or contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d incurred certain expenses in German DMs. The Indian person and the foreign company made a claim and counter claim. FE of some amount was adjusted against that claim of the foreign company. It was held that the adjustment tantamounted to making payment against FERA as FE which should have been received in India was not received but utilised to settle claim later by setting off one debt against another. The full payment was not received. It resulted in an adjustment. Yet the payment was made. It was held that the charge against the Indian person under Section 16(i)(b) of FERA was established. The adjustment which was made in that case was permanent. It was made once and for all. It was made several years after the amount became due. It was not a temporary measure. It did not reduce the liability of the Indian person for payment in FE. The case, therefore, does not go as far as the case of BIL. BIL would have been put in a far more precarious position and, it is contended, would have incurred the wrath of RBI. It would have had to make payments of far larger amounts for the coal than it would receive after the international market prices had fallen. The case of E -Merck (Supra) is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realise the amount of the washout charges. It has claimed the same before the arbitral tribunal. It has succeeded in its claim. The arbitral tribunal has granted it the amount. That is by way of adjustment towards the higher amount of damages so that lesser foreign exchange would be payable by BIL to Vitol then it would otherwise be upon its repudiatory breach. 42. It would, therefore, be material to see the precedents under Section 16 itself. The case of Texmaco Ltd. and Anr. Vs. Deputy Director, Enforcement Directorate, 1997 Company Cases Vol. 88 Pg.228, was a contract under private international law between India and Malaysia. Certain machinery was to be supplied by a Indian company in Malaysia. The machinery had to be erected. The Indian company was entitled to receive the amount CIF for the supply of the machinery as also erection charges. The machinery was found to be defective. The Malaysian concern called upon the Indian Company to withdraw its claim on account of erection charges and raised a counter claim. The Indian company wrote off its claim on account of erection charges and the Malaysian concern restricted its claim only for defective material. The RBI called upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Pvt. Ltd., Vs. N & S & N Consultants S.R.O. [(2012) 4 Comp LJ 178 (Del)], considering the provisions of FERA as well as FEMA, the Supreme Court has held that Section 3 of FEMA prohibits dealing with or contravening FE without the general or special permission of RBI. However, the transactions cannot be declared void if they are in contravention thereof. The Court has considered Section 47(3) of FERA which prohibited entering into any contract or agreement directly or indirectly for evading or avoiding FERA. However, FEMA has done away with such a provision. Consequently such contracts cannot be declared void. 45. Hence the award in this case would not be in contravention of FEMA. There are no directions passed which are contrary to FEMA in the award. The merits of the case are alone considered which cannot be gone into by this Court to interfere with the award. 46. Mr. Chinoy justifiably contended that the breach of Section 8 by BIL which it itself contends it has made it, could have been so only by its own act and not under any order of the Court or arbitral tribunal or any adjudicating authority. Indeed if the amount is payable upon an order of the Court the party requiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndamental policy of Indian law ; or (ii) the interests of India; or (iii) justice or morality. 49. In the case of Shri Lal Mahal Ltd. Vs. Progetto Grano Spa, (2014) 2 Supreme Court Cases 433 in paragraph 24 following the case of Renusagar Power Co. Ltd. Vs. General Electric Co., 1994 Supp (1) SCC 644 it was held that the defence of public policy taken up under Section 7(1)(b)(ii) of the Foreign Awards Act should be construed narrowly. It is observed that the concept of public policy must be construed as applied in the field of private international law and consequently to be against public policy it should be contrary to: (i) fundamental policy of Indian law ; or (ii) the interests of India; or (iii) justice or morality. 50. In paragraph 25 of the judgment the Supreme Court analysed and distinguished the case of ONGC Ltd., Vs. Saw Pipes, (2003) 5 SCC 705 for determining the Courts jurisdiction under Section 34 of the 1996 Act. The phrase "Public Policy of India" in the decision in the case of Renusagar (Supra) was analysed. The Court distinguished between the validity of the domestic award to be construed in a petition to challenge it under Section 34 of the Act in dist ..... X X X X Extracts X X X X X X X X Extracts X X X X
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