Calcutta High Court
Sleepwell Industries Co. Ltd vs Lmj International Ltd on 4 December, 2014
Author: Soumen Sen
Bench: Soumen Sen
ORDER SHEET
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
EC No. 487 of 2013
With
EC No. 488 of 2013
SLEEPWELL INDUSTRIES CO. LTD.
Versus
LMJ INTERNATIONAL LTD.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date : 4th December, 2014.
For Petitioner : Mr. Tilok Bose, Senior Advocate with
Mr. Dhruba Ghosh, Advocate and
Mr. A. Dey, Advocate
For Respondent : Mr. Surojit Nath Mitra, Senior Advocate with
Mr. Shyamal Sarkar, Senior Advocate and Mr. D. N. Sharma, Advocate th The Court : The execution application was moved on 16 January 2014 for enforcement of a foreign award. At the time of receiving the said application an interim order was passed restraining the judgment debtor from withdrawing any sum from the bank accounts mentioned in paragraph 26 of the affidavit in support of the Tabular Statement, save and except, in the usual course of business. The original award and the certified copy of the agreement were produced in court. The originals were returned to the decree holder and photocopies were taken on record. 2
An objection appears to have been taken at the admission stage as to the maintainability of the said application. Thereafter, series of orders were passed. In fact, by an order dated 18th September 2014, I directed the judgment-debtor to file an affidavit in which the judgment debtor was directed to disclose the particulars of all bank accounts and the amounts lying to the credit of the judgment-debtor in each of such bank accounts with supporting documents mentioned in paragraph 26 of the affidavit in support of the Tabular Statement. Pursuant thereto, an affidavit affirmed by one Ranjit Kumar Das on 29th October 2014 has been filed. The affidavit gives a very bleak picture about financial condition of the judgment-debtor.
Mr. Tilak Bose, learned senior counsel appearing with Mr. Dhruba Ghosh, submits that this award is enforceable in law. Mr. Bose has referred to Section 47 of the Arbitration and Conciliation Act, 1996 and submitted that once the decree-holder has produced the original award and a duly certified copy of the agreement for arbitration, the said award becomes enforceable. The said documents, in the submission of the learned Senior Counsel, would be taken as evidence and on production of such evidence the award become enforceable. It is submitted that the preamble of the Act coupled with the provisions mentioned in part II of the said Act would clearly show that on fulfillment of the conditions in Part II legislature wants to ensure due enforcement of foreign awards and the Court should be inclined in favour of enforcement of the award rather than obstructing its enforcement. Mr. Bose has referred to the earlier Act regarding enforcement of foreign award, namely Foreign Awards (Recognition and Enforcement) Act, 1961 and submitted that the preamble of the present Act would show that the legislature, after reviewing all the existing legislations on the subject, has passed a consolidated statute so that under one umbrella all these matters could be dealt with and decided. It is submitted that the affidavit disclosed in this proceedings would not show that any real challenge is thrown to the enforcement of the foreign 3 award inasmuch as, according to the learned Senior Counsel, no application has been filed by the respondent taking objection to the maintainability of the execution application. It is submitted that sufficient opportunity was given to the respondent to deal with the maintainability, but surprisingly the said respondent did not choose to file any objection or affidavit questioning the maintainability. The petitioner also referred to the affidavit filed in this proceedings by the respondent and submitted that it only reveals the impecunious situation of the respondent and it gives a clear impression that the respondent is trying to avoid execution of the award passed against it.
Mr. S. N. Mitra, learned senior counsel appearing with Mr. Shyamal Sarkar, Senior Advocate on behalf of the judgment-debtor, submitted that before any order could be passed in this proceeding, the Court is required to be satisfied that such foreign award is enforceable. The learned Senior Counsel referred to Section 45 of the said Act and submits that Section 47 is dependent upon a satisfaction being recorded by the Court that such award is enforceable. Section 48 lays down the condition for enforcement of the foreign award and it is only on a decision being arrived at with regard to the enforcement of a foreign award after considering any objection that may be raised by the judgment-debtor and falling within the purview of the said Section that the Court can direct the enforcement of the award. The learned Senior Counsel has also referred to Section 49 which states that where the Court is satisfied that the foreign award is enforceable under this Chapter namely part II, the award shall be deemed to be a decree of that Court.
The objection to the maintainability of the award is oral. However, since the Court is required to be satisfied about the maintainability of the petition, in view of Section 47 of the said Act, I feel, irrespective of filing an objection as to the maintainability of the said petition insofar as it relates to a legal submission touching on the validity and enforceability of the award, a party is entitled to raise such objection and the Court is required to decide such objection. 4
The first objection raised is that no prayer for declaration has been made in the application that the foreign award is enforceable. It is submitted that unless prayer is made seeking a declaration as to the enforcement of the award, the Court cannot assume jurisdiction. In this regard the learned Senior Counsel has referred to a Single Bench decision of the Bombay High Court in the case of Toepfer International Asia Pvt. Ltd. versus Thapar Ispat Ltd., reported in 2000 (1) Arb. LR 230 (Bombay) paragraph 19.
The second objection is that a civil suit is pending between the parties in which there is a categorical observation both by the learned Single Judge as well as the Division Bench that any action taken by the parties to the suit during the pendency of the suit shall be subject to and abide by the result of the suit. It is submitted that a cross appeal was preferred by the decree-bolder and this observation of the learned Single Judge was not interfered with and accordingly the execution application is premature and unless the suit is decided, the award does not attain its finality.
The third objection is that the arbitration clause has not been properly invoked. It is submitted that arbitration clause is a two-tier clause. Before the arbitration clause could be invoked, the parties are required to first make an attempt to amicably settle their disputes and only upon failure, the parties could refer their disputes to the arbitration as per GAFTA clause for rice and arbitration rules 125. It is submitted that there is no averment in the petition that before invoking the arbitration clause there was any attempt to settle the disputes amicably. Since this stage has not been reached, the invocation of Arbitration Clause is void ab initio. In this regard, the learned Senior Counsel has referred to an unreported decision of a single Bench of this Court in AP 112 of 2008 [Waidhan Engineering & Industries Private Limited vs. The board Of Trustees For The Port Of Kolkata] decided on 5th May 2010.
5
The fourth objection is that even if it is assumed for the sake of argument that this amicable settlement was not followed, even then Rule 3.1 was not followed with regard to the appointment of the sole Arbitrator. It is submitted that it was incumbent upon the decree-holder to inform the respondent about the appointment of a sole arbitrator and it was only on refusal to accede to such request that other procedures prescribed under the rules shall follow.
The fifth and the last objection appears to be that the nominee arbitrator of the respondent was appointed de hors the provisions of GAFTA Rules and accordingly the procedure adopted is irregular from the very beginning and the award is not enforceable.
In order to appreciate the objections raised by Mr. Mitra, it would be fruitful to refer to the grounds on which the Court can interfere with regard to the enforcement of the foreign award. The grounds are mentioned in Section 48, which states:
"Section 48.
48. Conditions for enforcement of foreign awards.-
(1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that -
(a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(c) the award 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 submission to arbitration: Provided that, if the 6 decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
(2) Enforcement of an arbitral award may also be refused if the Court finds that -
(a) the subject matter of the difference is not capable of settlement by arbitration under the law of India; or
(b) the enforcement of the award would be contrary to the public policy of India.
Explanation. - Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.
(3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security."
Of the various grounds referred to in Section 48, the real objections raised by Mr. Mitra come very close to section 48 (b) of the said Act with regard to the prior notice of the appointment 7 of arbitrator. On the basis of the disclosures made in this petition it appears that the decree-holder invoked the arbitration Clause by a communication dated 28th July 2011. The subsequent communications disclosed in this proceedings would show that after giving opportunity to the judgment-debtor to appoint an Arbitrator, the Tribunal had exercised its power under Rule 3.3.
Mr. Bose has referred to the preamble and the other provisions of the Act in order to impress upon the maintainability of the petition. The preamble to the Section, in my mind, is like a window to a room which gives a vision that one could get in by entering a particular room. It is the edifice on which the structure is built. The preamble set outs the object which is supplemented in the statement of objections and reasons. The legislature has consciously done away with the various statutes regarding enforcement of a foreign award. The legislative intent underlying the Act is to minimize the supervisory role of the courts in the arbitral proceedings and very limited interference. The objection raised by the petitioner appears to be more in quagmire of despondency and a desperate attempt to resist execution of an enforceable award rather than a real challenge thrown to the maintainability of the said petition. There is no document disclosed by the respondent to show that any objection was raised either with regard to the initiation of proceeding or thereafter. The explanation offered was such proceeding is vexatious, harassive and involves probative costs. This argument was not accepted by the Division Bench. In any event, when the notice invoking the arbitration was issued there is no reply to the said notice. Mr. Mitra submits that the disputes shall be required to be submitted to GAFTA, London for arbitration and the decree-holder would not be entitled to invoke the clause unilaterally for appointment of an arbitrator.
In my opinion, this submission cannot be accepted. It is an institutionalized arbitration. The rules provide the manner in which the parties are to act in matters relating to arbitration. 8 Elaborate procedures and mechanisms are provided in the Act for conduct of the arbitration. Rule 3 of GAFTA Rules deals with appointment of the Tribunal. It clearly shows that the disputes shall be heard and determined by a Tribunal or three Arbitrators (appointed in accordance with Rule 3.2) or, if both parties agree by a single Arbitrator (appointment in accordance with Clause 3.1). Once the petitioner has named an arbitrator and sent the notice to the opposite party it was open to the opposite party either to accept the said name or to disagree with the same, not later than 9th subsequent day after serving of the said notice, failing which the consequences mentioned in the other rules shall follow. On the basis of the materials on record it cannot be said that GAFTA Rules have not been followed with regard to the appointment of the Arbitrator. In fact the judgment-debtor was informed about the exercise of option and by reasons of failure of the said judgment-debtor to appoint the arbitrator the Dispute Resolution Service on 22nd September, 2011 appointed the nominee arbitrator on behalf of the judgement-debtor. Even otherwise, it is always open for either of the parties to waive a particular procedure. Mr. Mitra would submit that mere silence would not amount to waiver or acquiescence. There cannot be any dispute with regard to the same but this is a factual matter which can be decided only on evidence. It is too late in the day to argue that there is procedural irregularity or the judgment-debtor has not waived its right. Moreover, having regard to the fact that a suit has been filed, it is very clear that question of amicably settlement of dispute by negotiation was far fetched.
In such facts and circumstances, this Court is of the view that the objection raised by Mr. Mitra with regard to the maintainability of the petition cannot be accepted. Such objection is overruled. This execution application is held to be maintainable.
This Court is informed by the judgment-debtor that a sum of Rs.1.8 crore has been kept in a separate account with the Bank of Baroda, International Branch. The Chief Manager, Bank of 9 Baroda, International Branch is directed to create a fixed deposit of the aforesaid sum and shall forward the original fixed deposit receipt to the Registrar, Original Side of this Court within a week from the date of communication of this order and the Registrar, Original Side shall produce the said receipt on the returnable date.
This matter is made returnable two weeks hence.
Mr. Shyamal Sarkar, learned Senior Counsel appearing on behalf of the judgment-debtor, prays for stay of operation of this order. The prayer is considered and rejected.
The order of injunction shall continue until further orders.
[ Soumen Sen, J. ] sm.